Shell boss says Prelude will remain out of commission for months

Shell’s $US6.4bn Prelude was touted as the first of a revolutionary line of projects, but will remain out of commission for months.

Royal Dutch Shell’s Prelude floating facility has struggled to deliver income. PHOTO: ROYAL DUTCH SHELL AUSTRALIA/REUTERS

Western Australia’s hard border regime could keep Shell’s giant Prelude floating natural gas project out of commission until at least March, according to Shell boss Ben van Beurden,

Shell posted December quarter earnings of $US6.4bn ($8.98bn) on Thursday night, with booming gas markets boosting the global energy major’s ­bottom line.

But, amid a gas crisis in Europe that could be exacerbated by tensions between Russia and NATO, Mr van Beurden said he expected Prelude to remain out of commission for most of the first quarter as the company struggles to fix an electrical fault that forced the closure of the $US12bn ($16.8bn) floating platform in December.

Mr van Beurden said difficulties in getting specialists access to the platform, given mandatory 14-day quarantine requirements in WA, were partly to blame for the length of the outage.

“It had a pretty good reliability run in the second half of last year, but then in December we encountered an electrical fault in one of the battery systems that are associated with the uninterruptible power supply,” he said. “And we need to resolve these ­issues comprehensively and carefully before we restart.

“It’s a remote facility, it’s difficult to get people in – to get a vendor specialist in means that that person will need to quarantine for weeks before they can go on board. So these problems compound the issue a little bit.”

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, 475km north-northeast of Broome, in June 2019. However, the plant was yet to get anywhere near its full 3.6 million tonne-a-year capacity when it hit a series of safety incidents early in 2020, which were probed by the National Offshore Petroleum Safety and Environmental Management Authority.

It then suffered the electrical fault which caused the vessel to shut down in December.

The energy major – 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. That sparked an overall loss of $US4.9bn compared with a $US661m loss a year earlier.

The $US12bn Prelude platform was to blame for the bulk of the impairment as Shell cut its oil price forecasts and revised its stance over the “attractiveness” of the venture.

Mr van Beurden conceded the platform was suffering from “teething troubles”.

“Quite a few teething troubles, of course. But bearing in mind, this is a unique asset but with of course quite unique challenges,” he said. “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.”