Prelude to resume LNG production
Shell’s $US12bn ($16bn) Prelude floating LNG project off Australia’s northwest coast is poised to resume production, offering a new source of energy.
Shell’s $US12bn ($16bn) Prelude floating LNG project off Australia’s northwest coast is poised to resume production after a lengthy outage, offering the market a new source of energy amid a global squeeze on supply.
The oil and gas giant has not produced LNG from the facility since December 2, after an electrical fault forced the closure of the floating vessel located near the Prelude gas field, 475km northeast of Broome.
Shell said in February difficulties in giving specialists access to the platform because of mandatory 14-day quarantine requirements in Western Australia were partly to blame for the length of the outage.
The National Offshore Petroleum Safety and Environmental Management Authority on Friday cleared Shell to restart Prelude but no start-up date has yet been provided.
“We continue to work methodically through the stages in the process to prepare for hydrocarbon restart with safety and stability foremost in mind,” a Shell spokeswoman said on Sunday.
The addition of the plant’s 3.6 million tonnes of capacity will be well timed, with markets tight because of sanctions and restrictions on Russia, the world’s fourth-largest LNG producer.
Brent oil jumped to $US139 a barrel, a 14-year high, earlier in March while spot LNG prices rose to the equivalent of $US500 a barrel – described as “off the charts” by Woodside Petroleum – amid fears Russian output could be sidelined.
Consultancy Rystad said the restart of Prelude was positive for LNG markets.
“Australian regulator NOPSEMA has cleared Shell’s 3.6 Mtpa Prelude FLNG for a restart after the facility was taken offline in December 2021 due to a fire.
“Though commissioning may take a few weeks, this is a positive development for a region badly in need of every LNG molecule it can get its hands on,” Rystad said.
Prelude was touted by Shell as the first of a revolutionary line of projects to unlock gas resources previously considered too remote to support development of conventional land-based LNG plants.
The floating LNG vessel started delivering supplies from the Prelude gas field in June 2019.
However, the plant was yet to get anywhere near its 3.6 million tonne-a-year capacity when a series of safety incidents occurred early in 2020, which were probed by the National Offshore Petroleum Safety and Environmental Management Authority.
It then suffered the electrical fault that caused the vessel to shut down in December.
Shell – one of the nation’s biggest gas producers and foreign investors – was forced to write off $US6.2bn from its Australian operations for the 2020 financial year after the price of crude plummeted to a two-decade low last year.
The Prelude platform was to blame for the bulk of the impairment as Shell cut its oil price forecasts and revised its stance on the “attractiveness” of the venture.
Shell boss Ben van Beurden conceded in February the platform was suffering from “teething troubles”.
“Quite a few teething troubles, of course,” Mr van Beurden said.
“But bear in mind this is a unique asset but with, of course, quite unique challenges.
“We just want to make sure that whenever we restart, we know that we have solved the problem and we can do so safely.
“And for now we expect it to be out for most of the first quarter,” he said.