Prelude offshore LNG platform’s production is offline as Shell assesses a fire
Shell has had another setback at its Prelude floating LNG plant with production yet to restart after a fire before Christmas.
Shell has had another problem at its troubled $US12bn ($17.4bn) Prelude floating LNG project off the northwest coast, with production yet to restart after a fire days before Christmas.
A “small fire” detected on December 21 put a halt to LNG exports from the facility, and shipments from the plant have yet to resume as Shell works through the process of restarting the production plant.
“Production has been temporarily suspended and an investigation into the cause of the incident was conducted. We are working methodically through the stages in the process to recommence production with safety and stability foremost in mind,” Shell said in a statement.
“The regulator was informed and we continue to keep them updated on our progress.”
The fire was detected in a turbine enclosure and came a year after an electrical fault forced the facility offline, and after a raft of ongoing technical issues that have blighted the project since it first started up in 2019.
The plant “tripped” when an attempt was made to restart the Prelude system this week, Bloomberg reported on Tuesday.
“When it comes to Prelude, it’s best not to assume production will go as planned because it never has,” Credit Suisse analyst Saul Kavonic said.
The incident follows a volatile 12 months for the export facility 200km off Australia’s northwest coast.
Shell endured a 76-day standoff with unions in mid-2022 after being at loggerheads over a new enterprise agreement.
Unions had been pushing for a 30 per cent increase to the allowance given to staff working offshore, to $117,000 a year, and a range of improvements to conditions – and for bans on the introduction of contract workers.
Shell has taken its own pay offer directly to its workers, but 95 per cent of voting employees rejected the deal, while a shutdown of the plant occurred in July amid the industrial dispute.
The UK major had only restarted the shipment of LNG cargoes from Prelude in April after an electrical fault had forced a shutdown of the vessel in December 2021, near a gas field 475km northeast of Broome.
Prelude was touted by Shell as the first of a revolutionary line of projects to unlock resources previously considered too remote to support the development of conventional land-based LNG plants.
However, high costs and technical problems on Prelude have slowed momentum to sanction additional floating projects.
The gas vessel started delivering supplies from the Prelude gas field in June 2019. But the plant was yet to get anywhere near its full capacity when it hit a series of safety incidents early in 2020 that were probed by national regulator Nopsema. It then suffered the electrical fault, which caused the vessel to shut down in December 2021.
Shell owns 67.5 per cent of Prelude alongside Japan’s Inpex with 17.5 per cent, South Korea’s Kogas at 10 per cent and Taiwan’s CPC with 5 per cent.
Shell is one of the dominant players in Australia’s booming energy sector, operating the QCLNG export plant in Queensland, the Prelude floating LNG project off northern Australia along with stakes in Western Australia’s North West Shelf, Gorgon and Browse LNG ventures and gas business Arrow.
While Shell’s earnings are dominated by oil and gas currently, it wants to gradually shift the weight of its investment dollars to lower-carbon sources to reflect its prediction that the energy system will rely much more on electricity rather than fossil fuels for its generation.
It has identified Australia as one of six target markets where it will look to create an integrated electricity supply business with the potential to scoop up a “mass market” customer base through deal making. Shell said in December a tender process offering 50 petajoules of gas to buyers in 2023 and 2024 had been put on hold by its QGC business as it assesses the fallout from Labors proposal to permanently control prices.