RPT-Shell says no need to rush Australia Gorgon LNG expansion

Wed Feb 20, 2013 3:27pm EST

PERTH Feb 20 (Reuters) - There is no need to rush the expansion of the $52-billion Gorgon liquefied natural gas (LNG) complex, the chairman of Shell Australia said on Wednesday, adding that the company wanted to avoid distraction while it kept the project on track.

Shell holds a stake of 25 percent in the Gorgon development, located off the coast of northwest Australia and spearheaded by Chevron. Now 55 percent complete, it will be Australia's largest, with an output of 15.6 million tonnes per annum (mtpa).

The joint venture expects to make a final investment decision on an expansion to 20.6 mtpa this year.

"Gorgon is just one tough massive project ... we want to make sure that it stays on track and we don't want any distractions," Ann Pickard, told reporters at an industry conference in Perth.

"I have no doubt that we will go to expansion on Gorgon, but I don't think there's any need to rush into it."

Gorgon, which also includes the world's largest carbon capture and storage project, saw a $15 billion cost increase late last year, but Chevron still expects to have its first LNG shipments by 2015.

Chevron owns 47 percent of Gorgon, with Exxon and h Shell holding 25 percent each, and the rest is shared by Japanese LNG buyers Osaka Gas, Tokyo Gas and Chubu Electric.

Gorgon is just one of the roughly $190 billion worth of LNG projects under construction in Australia, many of which have faced cost blowouts due to the strength of the Australian dollar and inflated labour costs.

Cost increases have led some industry watchers to speculate that majors such as Shell will slow investment in Australia in favour of more lucrative investments elsewhere, but Pickard said Australian developments would still be important.

"I think the world's going to be able to take all the gas we can throw at it -- U.S., East African, Australian, Canadian -- I think the world can take it all," Pickard said.

FLOATING LNG TO SPEED UP TAX REVENUES

Floating LNG plants offer a lower-cost solution for developing Australian gas, Pickard added.

"The lower the capex, the faster you are into a tax-paying position," she said. "Floating is actually very good for the federal government in terms of getting the tax revenues out faster and quicker."

Shell is regarded as the frontrunner in developing floating LNG platforms and expects to bring online by 2017 the world's first floating LNG plant, Australia's Prelude LNG, which will generate A$12 billion in tax revenues.

Shell recently upped its stake in Woodside's Browse LNG development, a move that may signal the project will move forward as a floating LNG plant rather than a land-based plant, according to industry insiders and analysts.

Woodside now faces a mid-2013 deadline to decide if it will move forward with building an onshore LNG plant at James Price Point in northwestern Australia.

The James Price Point location has drawn criticism from groups who say it will cause damage to Aboriginal sites and to the environment, and some industry analysts say building an onshore plant may be uneconomic.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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