UPDATE 1-Woodside calls for floating LNG plant for Australia's Browse
MELBOURNE/PERTH Aug 20 (Reuters) - Woodside Petroleum Ltd has called for the construction of a floating liquefied natural gas plant to develop the Browse gas fields off Western Australia, rather than an onshore plant, to help beat high labour and construction costs.
Woodside, which has previously indicated a preference for the floating LNG option, scrapped a $45 billion onshore proposal in April, and the recommendation may mark a new era of focus on offshore LNG projects in Australia.
With around $190 billion worth of LNG developments under way in Australia, LNG developers have warned that soaring costs will inhibit the development of new projects as the country faces increasing competition from North America and East Africa.
Royal Dutch Shell is already expected to bring the world's first floating LNG plant, Prelude LNG, online in waters off northwestern Australia before 2017.
"The question is whether there will be any more onshore greenfield developments ... it does mark quite a distinct shift if we're talking about the next set of projects being offshore floating developments," said Chris Graham, an analyst with Wood Mackenzie in Perth.
It may cost 20-25 percent less to build gigantic floating barges to liquefy natural gas close to offshore wells, rather than pipe the hydrocarbon to a similar facility on dry land, according to analysts at Bernstein.
But an offshore plant faces opposition in Western Australia, where the state government is concerned it will create fewer jobs and reap much smaller benefits for the local economy.
Woodside Chief Executive Peter Coleman said on Tuesday that following a review of alternatives, including a pipeline to the North West Shelf LNG facilities and another onshore option, the company had decided to recommend floating LNG to its partners.
"Through this review, a compelling case has emerged for floating LNG as the best option for early commercialisation of the world-class Browse resource," he said.
Woodside has already signed on Shell, a joint venture partner and considered to be the global front-runner in floating LNG technology, to develop the field, but has yet to specify the size of any floating LNG development.
The Browse LNG development still faces significant challenges, especially from the Western Australian government, which holds some of the retention leases underlying the field.
The Australian federal government, which also hold retention leases for the gas field, has indicated support for Woodside's intentions to develop Browse.
In addition, Woodside has yet to get its joint venture partners in the development to sign off on the floating LNG development.
The company said in April that it would take at least two years to make a final investment decision on an alternative plan.
Woodside owns a 31 percent stake in Browse, alongside partners Shell, BP Plc, PetroChina, Mitsui & Co and Mitsubishi Corp.
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