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Shell’s giant floating refrigerator to tap new gas reserves

Chief executive Peter Voser tells Emily Gosden why the massive Prelude vessel is a game-changer

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6:00AM BST 21 Oct 2013

 Peter Voser is surveying the view from the Prelude vessel, which he has just boarded for the first time. “Now you see the difference,” he says, pointing out an oil tanker a few hundred yards away. “That’s a regular tanker. It’s a big one, yet a small one.”

Small compared with Prelude, that is. The same could be said of all the giant vessels here in Samsung Heavy Industries’ shipyard in Geoje, South Korea. Among them are liquefied natural gas (LNG) carriers, some of the world’s biggest ships. Yet all are dwarfed by Royal Dutch Shell’s monster. It is, as Voser puts it, “massive” – and it’s still only half-built.

Two-and-a-half years ago, Voser, Shell’s chief executive, signed off on the construction of the world’s first floating LNG (FLNG) plant. Expected to begin operation in 2017, it will be moored for 25 years at Shell’s Prelude field, 125 miles off Australia. There, it will produce gas, cool it to minus 162C – shrinking it to a liquid some 600 times more compact – and offload it to LNG carriers for shipping to gas-hungry markets in Asia. Shell, in short, is building a giant floating fridge.  

Once the liquefaction equipment is on deck – roughly doubling its height – it will be the biggest floating construction yet built. Fully laden with LNG, Prelude will weigh 600,000 tonnes – six times heavier than the biggest aircraft carriers. “They have a few planes and 6,000 people on those,” Voser says. “We will operate this thing with 130 people.” And the 1,600ft length? “It’s a par 5 in golf.”

Not that Voser plays much. “No no, you need time to golf,” he says, chuckling. “I don’t have time.” Not yet, anyway. At the end of this year, aged just 55, Voser will retire from Shell after four-and-a-half years at the helm.

He says he will enjoy “a more private life” – likely to include seeing more of his family in Switzerland and indulging his love of football. As a young man, Voser hoped to be a footballer and played professionally for a second-division Swiss club. “I was never good enough to have a decent life from it,” he says.

Shell, which has awarded Voser an annual pay package of over £4m in recent years, has certainly yielded that.

Voser joined the Anglo-Dutch giant in 1982, only leaving for a brief stint at ABB from 2002 to 2004. Returning to Shell as CFO, he worked to rebuild the company in the wake of the reserves misreporting scandal and, as CEO, has honed its strategy, in particular towards gas. “We expect to see global gas demand growing by over 60pc from 2010 to 2030,” Voser says. “This trend presents a great opportunity for Shell.” Under Voser, gas production has grown to at least half of the company’s output. Shell counts itself as a leader in so-called “integrated gas” – producing gas and then processing it.

Liquefying gas enables it to be shipped over large distances where pipelines could not reach. Global trade in LNG has doubled in the past decade and is only set to rise as large gas reserves are developed in Australia and East Africa, oceans away from the markets. There are more than 40 LNG export plants across 18 countries, and more than a dozen being built.

Until now, though, all have been on land. Shell has spent two decades figuring out how best to build an LNG plant that floats. Prelude must be able to withstand category five cyclones, for example. And despite its gargantuan size, it has been squeezed to fit on a ship, taking up just one-quarter of the area of an equivalent onshore plant. As Voser might put it, it’s a big one – but a small one.

The purpose of the innovation is to enable production from offshore gas fields where it is too costly or impractical to pipe the gas to land and build a liquefaction plant onshore. Voser says the development of FLNG should herald “a step-change in LNG opportunities”. Shell won’t disclose the costs of Prelude, but analysts put it at close to $13bn (£8bn). Building onshore would have required 50pc more infrastructure.

Voser says a floating plant was simply “the best technical solution” – but it has also saved Shell even greater exposure to rising costs in Australia, which have led to multi-billion-dollar budget blowouts in several onshore projects. “We are quite happy having Prelude being built here in Korea and not being exposed to Australian cost inflation at the moment,” Voser says.

He expects Prelude to be the first of several Shell FLNG plants – one of the next could be the Browse project, also in Australian waters, where Shell is a partner. The decision to look offshore has drawn criticism in Australia, which would lose out on construction jobs. But “an onshore project in western Australia was just not profitable”, Voser says. “It’s not a question of whether it’s a floating or an onshore project – it’s a question of it is floating or no project.”

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 With rivals now also pursuing FLNG projects, Voser believes that within two decades there could be dozens worldwide. Some could be off Mozambique and Tanzania, where Voser sees “potential for floating LNG solutions” for developing some of the giant offshore gas discoveries. “It’s quite far away from the coast, it’s a very nice coastal area – it would give you challenges with pipelines,” he says.

Despite Shell’s gas focus, it has no real presence in East Africa – in exploration, Voser says, “you get a few, you miss a few”. Opportunities exist, but Shell has so far “found it too expensive to get in there” – referring to its decision last year to walk away from a bidding war for Mozambique-focused Cove Energy.

Whether Shell makes another move for East Africa is now likely to be a decision for Ben van Beurden, who will succeed Voser in January. Voser won’t dispense advice for his successor, insisting he “is old enough and has 30 years of Shell experience – he knows what he needs to do”.

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But he does say: “Shell needs to stay ahead of the rest of the industry, in terms of technology and innovation, to be the right partner for governments and other companies to develop energy resources in the future.”

Perhaps no surprise, then, that of all the projects Voser has been involved with, it is the world first of Prelude he says he feels “most attached to”. “It makes me proud of what Shell can do,” he says.

“What we do best is we make breakthroughs in the industry.” And despite his imminent retirement, Voser admits, this may not be his last visit to see Prelude’s progress.



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