Lift productivity to lure LNG investment, says Shell CEO Ben van Beurden

THE head of the world’s second biggest company, Royal Dutch Shell, says Australia maintains an edge in attracting LNG investment.

THE head of the world’s second biggest company, Royal Dutch Shell, says Australia maintains an edge in attracting LNG investment but needs to improve labour productivity and start acting on commitments to streamline approvals if it is to capture growth from new competitors such as Papua New Guinea, the US and east Africa.

Despite making $10 billion of asset sales here since taking the top job in January — including the company’s refinery and service station business — Shell chief executive Ben van Beurden wants to make more investments.

Mr van Beurden said the nation’s location, stability and expertise still gave it an edge in meeting growing Asian LNG demand that showed no signs of slowing.

Speaking on the sidelines of the B20 conference in Sydney, on his first visit to Australia since taking the chief executive’s role, Mr van Beurden said: “I still believe Australia is a fantastic investment destination for us.

“The (LNG) demand is there and we very much like investing in an OECD country that is so well placed geographically and in terms of capability, and which we know well because we have been here for more than a century.”

Cost pressures that led the oil giant to abandon plans for the $20 billion Arrow LNG plant at Gladstone and the Browse LNG plant at James Price Point near Broome (to study a floating LNG plant) remain.

“There are many, many more things the country can do to make it more easy to invest and take some of the unproductive heat out of the market,” Mr van Beurden said.

“Labour productivity, in my mind, is below par. We’ve heard Prime Minister Abbott talk about simplifying regulations to make it easy for people to invest. I wholly support that but it still needs to happen.”

Since Mr van Beurden took the helm of Shell, whose revenue of $US460bn last year puts it second only to Walmart ($US472bn), he has sold the Geelong refinery and Shell’s network of service stations, a 19 per cent stake in Woodside Petroleum and Shell’s 6 per cent stake in Chevron’s $US29bn Wheatstone LNG plant being built in Western Australia.

But it still has $US20bn of investment tied up in the Chevron-run Gorgon LNG project and its world-first Prelude floating LNG project, which includes the world’s biggest man-made vessel.

Mr van Beurden said Shell was keen to increase its investment in Australia over the next five years through development of Browse and Arrow, through a tie-up with another Gladstone LNG plant because Asian LNG demand is expected to underpin a doubling of global LNG demand between now and 2030.

“There are other suppliers coming into the market: Papua New Guinea, East Africa, Indonesia,” he said.

“But Australia does have a lot of infrastructure, capability and experience in the industry. It’s a bit of a tight labour market but ­labour is, in principle, available.

“I still think Australia has the edge and we are keen to invest more in it.”

At Arrow, a Queensland coal- seam gas joint venture with state-owed PetroChina, Mr van Beurden said Shell remained in talks with all three of the under-­construction projects being built at Gladstone after the company decided not to build a separate fourth plant in the face of surging construction costs.

“In my mind there is some long-overdue thinking of restructure and consolidation at Gladstone that needs to happen,” he said.

“We can be a very relaxed and strategic player in that game and for me, all options are open.”

While Mr van Beurden did not rule it out, continuing the Shell asset sale program by selling the Arrow stake did not appear likely.

“We are in a very good position to help restructure the industry in Queensland and be a very strong beneficiary,” he said.