Shell open to Browse gas project despite refocus
Energy giant Shell has kept the door ajar to investing in the long delayed $US20bn Browse gas project in Western Australia.
Energy giant Shell has kept the door ajar to investing in the long delayed $US20bn Browse gas project in Western Australia and remains committed to the ageing North West Shelf LNG plant as it moves to an infrastructure-style tolling model.
The Anglo-Dutch company, one of Australia’s biggest foreign investors, is undergoing a major strategy shift amid intense investor pressure to reduce its carbon exposure and step up efforts to tackle climate change.
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 the energy system will rely much more on electricity rather than fossil fuels for its generation.
That has sparked speculation whether it would remain a partner in Woodside Petroleum‘s Browse LNG project in WA, given the high emissions projected from the development. However, Shell Australia chairman Tony Nunan said the joint venture was reworking the development and he hoped it could yet proceed.
“All of the venture partners are focused on how do we continue to improve the concept of Browse to make it as competitive as it possibly can be both from a cost and a carbon perspective,” Mr Nunan told media on Thursday.
“I don’t want to pre-empt the outcome of where the venture is getting to on that, but it has been very aligned on driving the competitiveness of that resource. Once that work is complete, the test will be whether that does stack up, but I don’t want to pre-empt where it gets to.”
Both Shell and BP as Browse partners are thought to hold concerns about the high carbon content of the Browse development, particularly given their global shift to less polluting sources of energy.
To ease concerns, Woodside has proposed adding a carbon capture facility to Browse, with a sequestration component to be included from the start of operations rather than 10 years into the project as originally forecast.
Still, Browse is seen on the backburner with a final investment decision from Woodside and its partners due sometime from 2023 onwards and the potential a new chief executive may plot a different path for the project.
Gas from Browse was originally planned to be used to top up supplies from the NW Shelf plant.
The imminent move to infrastructure-style returns under the tolling mechanism has sparked a shake-up in North West Shelf ownership with US giant Chevron putting its one-sixth stake up for sale and BHP to consider offloading its share once the tolling model has been established.
Despite the ructions, Shell said it was committed to the plant where it owns a one-sixth stake.
“It’s changing in the nature of its assets, so it’s in a phase where it will see less equity production over time. I think the most important thing for NW Shelf is to maximise its infrastructure position,” Mr Nunan said. “We don’t speculate on the long-term and where assets sit in our portfolio and I’m very focused on where they are today.”
The plant, located 1260km north of Perth, includes five LNG export processing trains and two domestic gas facilities. Woodside runs the facility in a joint venture with BHP, BP, Chevron, Shell, Mitsubishi and Mitsui.
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.
The energy major appointed former BHP boss Andrew Mackenzie as its global chairman earlier in March, taking over the role at a pivotal moment after Shell recently conceded its oil production would slowly decline after peaking in 2019.
Shell is also pushing into electricity and renewables markets in Australia after paying $620m for ERM Power, buying a half-stake in solar power developer Esco Pacific and developing the 120MW Gangarri solar plant in Queensland’s Western Downs region.
Australia has been identified as one of six target markets where Shell will look to create a fully integrated electricity supply business with the potential to scoop up a mass-market customer base through deal-making.
However, the Shell Australia boss said it had not made any decision either way.
“We’ll keep looking through other parts of the energy system. We haven’t made firm decisions or not on whether we’ll take that all the way to residential customers but likewise we still look at those opportunities. You would have seen we have done that in other parts of the world. It’s an open question and we’ll continue to explore the opportunity.”
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