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Shell ships long-awaited first LNG cargo from Australia’s Prelude

FOUR DIFFERENT ARTICLES REPORTING ON FIRST PRELUDE LNG CARGO: TUESDAY 11 JUNE 2019 

Sonali Paul: 11 JUNE 2019

* Prelude seals Australia as world’s top LNG exporter

* Prelude marks last of Australia’s $200 bln LNG construction boom

* Start-up comes amid glut in LNG market

* Rival Ichthys LNG could sap some Prelude gas reserves (Adds comment on Prelude gas sources)

By Sonali Paul

MELBOURNE, June 11 (Reuters) – Royal Dutch Shell on Monday shipped the long-awaited first cargo of liquefied natural gas from its massive Prelude floating LNG plant off northwest Australia, sealing the nation’s position as the world’s top exporter of the fuel.

The start-up comes just as spot LNG prices have sunk to their lowest in over three years, with new projects in Australia and the United States boosting global supply while demand in Asia was dented by a mild winter.

Prelude is the last of eight LNG plants built on Australia’s eastern and northwestern coasts in a $200 billion LNG construction boom over the past decade.

Its first cargo had been targeted for 2018, but was delayed by a string of teething problems at the world’s biggest floating vessel. The 490-metre long (1,600 ft) ship is longer than four soccer fields and six times bigger than the world’s largest aircraft carriers.

Shell declined to comment on the cost of Prelude, but consultancy Wood Mackenzie estimates it at around $17 billion.

“Today’s first shipment of LNG departed from Prelude FLNG, safely,” Shell’s integrated gas and new energies director, Maarten Wetselaar, said in a statement.

The cargo on the Valencia Knutsen LNG tanker is going to customers in Asia, Shell said, without giving the size of the shipment.

Prelude is expected to produce 3.6 million tonnes a year of LNG, 1.3 million tonnes a year of condensate and 400,000 tonnes a year of liquefied petroleum gas (LPG).

The project is jointly owned by Shell, Japan’s Inpex Corp , Korea Gas Corp and Overseas Petroleum and Investment Corp, a unit of Taiwan’s CPC Corp.

Shell had expected Prelude to be the world’s first floating LNG project, but was beaten by Malaysia’s Petronas, which shipped the first cargo from its PFLNG Satu project two years ago. Prelude is the world’s biggest floating LNG plant, however.

It took two years from the time the vessel was first moored on top of the fields that feed it to ship the first LNG cargo.

“How fast Prelude delivers its second and third cargo and ramps up to plateau output will be a key indicator of success,” said Daniel Toleman, an analyst at Wood Mackenzie.

Chris Meredith, another Wood Mackenzie analyst, earlier said it was no surprise that Prelude had faced lengthy delays.

“It’s such a novel technology and an isolated location. It was always going to be difficult,” he told Reuters in an interview in late May.

OVERLAP

Inpex’s $40 billion Ichthys project at an onshore plant in Darwin has more than double the LNG capacity of Prelude at 8.9 million tonnes a year. That development shipped its first LNG cargo last October, also following lengthy delays.

Shell and Inpex had been racing each other to bring their projects online as the Ichthys field partly overlaps the Prelude gas field, which is one of two fields feeding the floating LNG project. The other is called Concerto.

Besides starting ahead of Prelude, Ichthys ramped up to full capacity faster than expected, with Wood Mackenzie and another consultancy, EnergyQuest, both estimating it reached full capacity within about seven months of start-up.

“As a result of Ichthys starting up earlier, there might be some negative impact on Prelude’s reserves,” Toleman said.

Shell has already started design work to develop another field, Crux, to help keep Prelude FLNG filled from 2025, according to a plan filed to Australia’s offshore petroleum regulator.

“At this stage we see Crux coming in at 2025. That’s quite a short production plateau for Prelude. I can’t think of any analogues for LNG projects that have had that short a plateau on the initial project,” Toleman said.

Shell and Inpex were not immediately available to comment on the impact on Prelude from Ichthys’ earlier start-up.

Reporting by Sonali Paul; Editing by Richard Pullin and Joseph Radford

SOURCE

RELATED ARTICLE

S&P Global Platts: Shell ships first LNG cargo from Prelude FLNG project in Australia

Singapore — Shell has shipped its first LNG cargo from the Prelude floating liquefied natural gas or FLNG facility offshore Western Australia, on the vessel Valencia Knutsen to customers in Asia, the oil major said Tuesday in a statement.

The shipment marks the startup of one of the most anticipated LNG projects in the world and will boost Australia’s LNG export volumes as it ramps up capacity in coming months.

“Today’s first shipment of LNG departed from Prelude FLNG, safely,” Shell’s Integrated Gas and New Energies Director Maarten Wetselaar said. “Prelude forms an integral part of our global portfolio and plays an important role in meeting the growing demand for more and cleaner energy for our customers around the world.”

Prelude FLNG will produce 3.6 million mt/year of LNG, 1.3 million mt/year of condensate and 0.4 million mt/year of LPG at full capacity. It is operated by Shell with a 67.5% interest in a joint venture with Japan’s Inpex with 17.5%, South Korea’s Kogas with 10% and Taiwan’s Overseas Petroleum and Investment Corp with 5%.

Prelude started gas production from the wellhead in December 2018 and began shipping condensate in March 2019.

“The first [LNG] cargo was more than eight years after FID and nearly two years after the facility arrived in Australia. How fast Prelude delivers its second and third cargo, and ramps up to plateau output, will be a key indicator of success,” Wood Mackenzie senior analyst Daniel Toleman said.

“The Prelude facility will be backfilled by Crux, which entered FEED this year. We expect a FID late next year with first production in 2025,” Coleman said. He said Shell will spud the Bratwurst exploration well later this year and if a significant gas resource is discovered, it is likely to be developed via the Prelude facility.

Inpex said it will supply its equity portion of LNG from Prelude at plateau production to trading company JERA and Shizuoka Gas, at 0.56 million mt/year and 0.07 million mt/year respectively, contributing to stable energy supply to Japan. It expects Prelude FLNG to have a minimal impact on its financial results for the fiscal year ending December 2019, but expects it to add to revenue and cash flow for the fiscal year ending December 2020.

“With Prelude on stream, Australia is on track to export more than 80 million mt/year of LNG, which surpasses Qatar as the largest LNG producer in the world,” Coleman said, adding that the project marks the end of the Australian greenfield LNG boom.

–Eric Yep and Takeo Kumagai, [email protected]

–Edited by Wendy Wells, [email protected]

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Peter Milne and Daniel Newell The West Australian

Almost two years after sailing into Australian waters Shell’s giant Prelude — the biggest offshore facility ever constructed — has at last shipped its first cargo of LNG.

As flagged by The West Australian last week, Shell and joint venture partners Inpex, Kogas and OPIC this morning announced Spanish carrier Valencia Knutsen had left Prelude, 475km north-east of Broome, with a full load of LNG for customers in Asia.

Maarten Wetselaar, Shell integrated gas and new energies director, said it was an important milestone in the floating LNG project.

“Today’s first shipment of LNG departed from Prelude FLNG, safely. Everyone involved should be very proud of the work taken to reach this important milestone,” Mr Wetselaar said.

The Valencia Knutsen was alongside the 488m-long Prelude for 21/2 days from Saturday morning to late Monday night, according to vessel tracking website MarineTraffic.

The Prelude had problems mooring vessels alongside it last year.

To receive LNG a carrier must berth alongside the Prelude as the two vessels bob about in the sea and the Prelude “weathervanes” around its mooring turret.

More common floating oil production facilities offload oil to a tanker a safe distance away through long flexible hoses and avoid the difficulties of two vessels being alongside each other.

Shell vice-president for Prelude Rob Jager said in May that Prelude’s role as an open-sea port was probably the most unique and underrated aspect of the facility.

He said the sophisticated modelling of how the two vessels would move under the influence of wind, waves and currents was ongoing.

“We continue to have to work through to make sure that it gives us a safe, sustainable, predictable way of offloading,” he said. “Because ultimately, it’s going to be a bit of a production line once this thing is stable and up and running.”

Wood Mackenzie analyst Daniel Toleman said Shell will be keen to reach full production quickly to minimise the loss of reserves to the nearby Ichthys project as the fields are connected.

“How fast Prelude delivers its second and third cargo, and ramps up to plateau output will be a key indicator of success,” he said.

Prelude must load a carrier every five to seven days – a process that planned to take about 15 hours – to produce its nameplate capacity of 3.6 million tonnes a year of LNG.

The Korean-built Prelude is the largest, and perhaps the most complex, offshore facility in the world.

Shell Australia chairwoman Zoe Yujnovich said Prelude “combines human endeavour and ingenuity from across the globe and here in Australia”.

“We are proud to work with our local communities, suppliers and partners to ensure its safe, reliable operations into the future.”

Mr Toleman said the completion of Prelude marked the end of the Australian greenfield LNG boom.

“The next investment cycle is already in sight, with backfill projects – Scarborough, Barossa, Browse, Arrow and Crux – vying for final investment decision,” he said.

SOURCE

Jun 11th, 2019

The Valencia Knutsen, a Spanish-flagged tanker, is transporting the LNG cargo from the Prelude complex in block WA-44-L.Shell

Offshore staff

TOKYO – The first LNG shipment has sailed from the Shell-operated Prelude FLNG facility, 475 km (295 mi) northeast of Broome, Western Australia.

The Valencia Knutsen, a Spanish-flagged tanker, is transporting the cargo from the Prelude complex in block WA-44-L.

According to Shell’s partner INPEX, the FLNG vessel gathers, processes, stores, and offloads natural gas and condensate products.

Gas production started last December, followed by the initial shipment of condensate in March 2019.

Wood Mackenzie senior analyst Daniel Toleman pointed out that the first LNG cargo departed more than eight years after the project’s final investment decision (FID) and nearly two years after the FLNG facility arrived in Australia.

“How fast Prelude delivers its second and third cargo and ramps up to plateau output will be a key indicator of success,” he claimed.

“Shell will be keen to ramp up to full production quickly to counteract any reserves impact from the already producing and connected Ichthys field.”

Front-end engineering design started earlier this year for the Crux field, which will also send production to the FLNG vessel. “We expect an FID late next year with first production in 2025,” Toleman said.

Later this year Shell plans to spud the Bratwurst exploration well. If this leads to a significant gas discovery, the volumes could also be developed via the Prelude facility. 

With Prelude onstream, Australia is set to export more than 80 MMt/ytr of LNG, Toleman continued, which means it would overtake Qatar as the world’s largest LNG producer.

“The completion of Prelude marks the end of the Australian greenfield LNG boom. The next investment cycle is already in sight, with backfill projects – Scarborough, Barossa, Browse, Arrow and Crux – vying for FID.”

06/11/2019

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