Woodside Petroleum Ltd. (WPL.AU) Tuesday said it wants to develop a huge natural gas field offshore Australia using a vessel that can process gas at sea, in a potentially cheaper but risky move as the technology has yet to be deployed anywhere in the world.
Woodside Petroleum Ltd. (WPL.AU) Tuesday said it wants to develop a huge
natural gas field offshore Australia using a vessel that can process gas at
sea, in a potentially cheaper but risky move as the technology has yet to be
deployed anywhere in the world.
It comes after Woodside and partners scrapped an earlier plan to process gas
from the Browse field at an onshore facility at James Price Point in
Western
Australia
, citing high development costs at a time when
competition with North American gas producers is intensifying.
Floating liquefied natural gas, or FLNG, technology is being pioneered by
energy companies to develop gas fields too small or remote to justify the use
of conventional pipelines and onshore facilities. Companies also claim FLNG is
better for the environment because it doesn't require the stripping of land on
the coast or dredging to create a port for tankers.
But the technology, which relies on huge floating vessels, some as long as five
football fields, is untried on a commercial scale. The processing and
offloading platforms will be moored to the seabed and face technical risks,
including withstanding stormy seas and regular cyclones off
Australia
's
northwest coastline.
Woodside is recommending FLNG technology developed by Royal Dutch Shell PLC
(RDSB.LN), which is building a separate platform for its Prelude project, also
located offshore north-western
Australia
. Shell
is the second-largest shareholder in Browse, which contains an estimated 15.5
trillion cubic feet of natural gas.
Separately, Exxon Mobil Corp. (XOM) is investigating whether to use its own
FLNG technology to develop the
Scarborough
gas
field offshore
Western Australia
,
which was discovered decades ago but remains untapped due to its remote
location.
Earlier this year, Woodside said a land-based facility for Browse was too
expensive, overcoming the objections of political leaders who hoped it would
create jobs in remote communities. Analysts had estimated the cost of building
the facility at James Price Point had blown out to more than US$40 billion amid
a slew of cost overruns at other big Australian mining and gas projects.
Due to be built in a place marked with one of the world's longest chain of
dinosaur footprints, the project faced staunch opposition from environmental
groups and angered some traditional land owners.
After spending four months studying alternatives, including a pipeline to
existing onshore plants, Woodside said it would recommend FLNG to its partners
in Browse.
"Through this review, a compelling case has emerged for FLNG as the best
option for early commercialization of the world-class Browse resource,"
Woodside Chief Executive Peter Coleman said in a statement.
The selection of FLNG now requires the approval of Woodside's Browse partners
before progressing through to early design work for a development that may be
still two years away from a final investment decision.
"We believe Shell's FLNG technology is the fastest, most economic and the
best technical solution available for Browse," said Andrew Smith, Shell's
top official in
Australia
.
Australia
has
long harbored ambitions of becoming the major liquefied-natural-gas, or LNG,
supply hub for
Asia
and has over a dozen projects
either under construction or on the drawing board. The seven terminals
currently being built should allow
Australia
to
leapfrog
Qatar
as
the world's biggest LNG exporter by 2018.
Woodside's recommendation for Browse comes just days after ExxonMobil released
an updated environmental report for its
Scarborough
project.
Exxon, which unveiled its FLNG proposal in April, said it may begin early
design work this year for a 495 meter-long platform that would process 6-7
million tons per annum of LNG.
Subject to approvals, the
U.S.
company aims to make a final investment decision in 2014-2015, with first
production from 2020.
Chevron Corp. (CVX), meanwhile, is pushing ahead with onshore facilities for
its Gorgon and Wheatstone gas-export projects, among
Australia
's
biggest.
The company has been at the sharp edge of
Australia
cost
increases, revealing in December a 21% cost overrun at Gorgon to 52 billion
Australian dollars (US$48.4 billion). Wheatstone, which is at an earlier stage
of construction, remains within its US$29 billion budget.
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