MELBOURNE, Nov 20 (Reuters) - Royal Dutch Shell may delay a final investment decision (FID) on its Arrow liquefied natural gas project in Australia as it considers feeding its gas into other LNG projects in the area due to rising costs, a newspaper reported on Tuesday.
“There is no rush for us to enter an FID, and we’ll time this with local market considerations and potentially combine with third parties,” the Australian newspaper cited Shell oil and gas production chief Andrew Brown saying.
The comments mark a change from Shell’s plan to build its own LNG plant in Queensland in a partnership with PetroChina next to three others already under construction, as skills and equipment shortages and a stubbornly strong Australian dollar have jacked up construction costs.
“With three projects under construction at Curtis Island, it makes sense to think about the best value solution for Shell and get the timing right,” Brown was quoted telling investors at a briefing in New York.
Arrow LNG is one of four projects on Australia’s east coast that aim to pump gas from coal seams to export facilities. The estimated investment for all the projects is rising rapidly from the initial price tag of around $70 billion.
Other Queensland LNG project owners have been scrambling to sell down stakes in their projects to spread risk and defray their costs, with industry experts speculating that cost pressures may deter expansions of existing projects.
BG Group sold a 40 percent stake in its Queensland Curtis LNG project earlier this month to China’s CNOOC for $1.93 billion.
Origin Energy and Conoco Phillips are each looking to sell down 7.5 percent stakes in their Australia Pacific LNG project, to cut their stakes to 30 percent each, having already sold a 25 percent stake to China’s Sinopec .
Brown also confirmed that Shell faces a big cost hike and possible start-up delay at Australia’s biggest LNG project, Gorgon, operated by Chevron.
“When Shell took FID on Gorgon in 2009, we had assumed a higher budget than then $37 billion described by Chevron, the operator, and a later start-up schedule than the first gas in 2014 that was expected,” Brown was quoted as saying.
“Today our cost estimates are higher again than our assumptions at FID, and we remain conservative on the start-up date,” he said.