* Shell says Prelude set to be world's first floating LNG
* Facility to weigh as much as six aircraft carriers
* Project due to have capacity of 3.6 million tonnes per
(Adds comments from Shell executive, clarifies dollar cost of
By Rebekah Kebede
PERTH, May 20 Royal Dutch Shell (RDSa.L) on
Friday gave the go ahead to a $10 billion-plus liquefied natural
gas (LNG) project in Australia, set to be the world's first
floating LNG plant and targeted at soaring Asian demand.
The Prelude project, with a capacity of 3.6 million tonnes a
year and which Shell expects to come online around 2017, would
be the largest floating object in the world -- longer than four
soccer fields laid end to end.
"This is going to be a seal of confidence in the idea of
floating LNG," said Tony Regan, analyst at Tri-Zen Capital in
Singapore. Up until now, the liquefaction of offshore gas has
involved piping the gas to a land-based plant.
Shell's executive director of upstream international
business, Malcolm Brinded, said floating LNG would "change the
rules of the game" in the LNG industry and said he hoped several
more floating LNG projects will be approved before Prelude
Shell's overall upstream investment in Australia would reach
some $30 billion over the next five years, the company said, but
it declined to give details on Prelude's cost.
The capital expenditure for Prelude would be similar to
recently approved LNG projects at around $3 billion to $3.5
billion per million tonnes of LNG per year, Brinded said. That
would indicate costs for the 3.6 mtpa project of around $10.8
billion to $12.6 billion.
Shell, the largest private LNG shipper in the world, said it
was ready to start detailed design and construction on the
facility in a shipyard in South Korea.
When fully equipped and with its storage tanks full, it
would weigh around 600,000 tonnes - about six times as much as
the largest aircraft carrier, Shell said. It would use 260,000
tonnes of steel and be designed to withstand a Category 5
With the approval of Prelude, Shell joins a raft of other
LNG project developers scrambling to meet rapidly growing Asian
demand, particularly from China and India. Shell expects Asian
LNG demand to double by 2020, according to Brinded.
Japan's LNG demand is also rising after a devastating
earthquake and tsunami forced it to take several nuclear
Japan has increased its LNG imports by 20 cargoes a month to
fire gas power plants to compensate for some of the lost
nuclear-generation capacity. The impact of the tsunami may
result in Japan bumping up LNG imports by 7 to 8 million tonnes
per year from 70 million tonnes of LNG in 2010. [ID:nL3E7GA07F]
China imported just over 9 million tonnes of LNG in 2010,
but its consumption is expected to rocket five-fold to 46
million tonnes by 2020.
Australia currently has around A$200 billion worth of LNG
projects on the drawing board. The industry aims to triple
current production to 60 million tonnes a year by 2020.
"It's significant from Australia's perspective because it's
another project under construction," said Craig McMahon, an
analyst at Wood Mackenzie.
"During 2011 you could have seven projects under
construction at the same time, all the talk and potential is
becoming a reality."
Earlier this week, Shell signed an agreement to supply
Taiwan's CPC Corp with 2 million tonnes of LNG per year for 20
years. Although the company said the LNG supply would come from
its global portfolio, analysts said the deal is likely linked to
Prelude LNG. [ID:nL4E7GG11G]
Shell has also secured an offtake agreement with Osaka Gas
for 0.8 mtpa from the Prelude project.
Shell's technology is also due to be used in a planned
floating LNG plant for the Greater Sunrise field in waters
straddling East Timor and Australia with Woodside Petroleum
. East Timor is disputing the plan and wants an LNG
plant built on its shores.
(Editing by Ed Davies and Simon Webb)