Shell Gas Find Supports W Australia Floating LNG Plan

SYDNEY (Dow Jones Newswires), Aug. 7, 2009

Royal Dutch Shell PLC said Friday it has struck gas in the Browse Basin offshore Western Australia state, possibly supporting its plans to build what could be Australia's first floating liquefied natural gas plant.

The discovery was made at the Concerto-1 well in Shell's fully owned permit WA-371-P, which is close to the Prelude gas field. It is the 10th well in a 12-well drilling campaign in that permit and follows the initial Prelude-1 discovery there in 2007, made 16 kilometers away.

"Work is now underway to establish the extent of the find and consider development options," a Shell spokeswoman said of the latest discovery.

"It is too early to estimate volumes but the indications are sufficient for us to be looking at ways to commercialize it."

The news comes just days after Shell Australia Chairman Russell Caplan reiterated that Prelude remains a "strong contender" to be the first major Shell development using new floating LNG technology.

It also comes a week after Samsung Heavy announced that it has received a US$5 billion order from Shell to build a floating LNG facility, and awarded exclusive rights to build another nine for Shell over the next 15 years.

Shell declined to give specific results of the other eight wells it has drilled so far in WA-371-P. The Shell spokeswoman said the final 12th well is currently being drilled.

"It's been a successful 12-well campaign with the Prelude discovery, the Concerto discovery and a variety of plays elsewhere," she said.

Shell's Caplan said Monday that a firm development timetable hasn't been determined for Prelude.

According to an application lodged by Shell in April, 2008, with Australia's federal Environment Department, Shell said it is considering a 3.5 million metric tons a year floating LNG plant to be operational by 2012.

The floating plant is expected to be 480 meters long with a width between 70 meters and 80 meters and would be built outside Australia and towed to the Prelude field, Shell said.

LNG terminals traditionally need 5 trillion cubic feet of gas to get built and Shell indicated a few years ago that it would like to use floating LNG technology to develop smaller resources.

It has previously estimated the Prelude field to contain 2 trillion-3 trillion cubic feet of gas. The company also owns part of the Crux field, also in the Browse Basin, but that asset's over 100 kilometers away from the Prelude field.

Citigroup said July 29 that since the world's first floating LNG terminal opened in 2005, the floating LNG industry has grown and is now a major focus of LNG development.

It said expenditure on floating LNG facilities is forecast to reach US $27 billion between 2009 and 2015, quoting independent research firm Douglas Westwood.

If Shell goes ahead with the Prelude project it would add to the near-dozen LNG projects planned in Australasia to 2015.

Woodside Petroleum Ltd. is expected to decide whether it will float its proposed Sunrise LNG project or build it at Darwin by year end.

Japan-based Inpex is also planning to build a large-scale LNG project at Darwin utilizing gas from the Ichthys field, next to the Prelude field.  

Copyright (c) 2009 Dow Jones & Company, Inc.