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LNG production at Shell’s Prelude gas processing plant in Western Australia restarts following 11-month closure

LNG production at Shell’s Prelude gas processing plant in Western Australia restarts following 11-month closure

ABC KimberleyBy Ben Collins: 23 Jan 2021
“As for making money from this project, that’s extremely unlikely because the cost overruns and completion delays are in the horrendous category,”…

Key points:

  • The facility was shutdown for 11 months after electrical and safety problems
  • Some analysts hold concerns about the facility’s economic and environmental performance
  • Shell has never revealed the cost of constructing Prelude

Liquified natural gas (LNG) production has restarted this month on the world’s largest floating object, Shell’s half-kilometre long Prelude gas processing facility.

The restart is much-needed good news after an 11-month shutdown following a technical issue only described as an “electrical trip” by Shell, and three incidents that the offshore energy regulator NOPSEMA described as “dangerous occurrences”.

Two of those incidents involved “loss of hydrocarbon containment”.

The facility has been moored 400 kilometres north of Broome in north-west Australia since November 2017.

It is intended to process 3.6 million tonnes of LNG each year from undersea gas fields which is then offloaded to LNG ships for export.

Curtin University energy economist Roberto F Aguilera is optimistic about Prelude’s future but said being shutdown for almost a third of the first three years had been a difficult beginning for the $12–$17 billion facility.

“They would be hoping that this is a problem with the start of the process, and going forward is something that won’t be repeated.”

Resource Industry Analyst Tim Treadgold who writes for US business magazine Forbes remains unimpressed by Preludes’ production restart, a facility he has previously described as a “big embarrassment”.

“They say it’s a multi-decade project and it looks like they’re going to take many decades to prove it.”

Shell has never revealed the cost of constructing Prelude and declined to be interviewed or answer questions about the recent production restart.

Estimated construction costs of $12–17 billion to then process a maximum of 3.6 million tonnes annually will make it hard for Prelude to compete with land-based LNG according to Mr Treadgold.

“Prelude starts from behind the eight ball, it’s very expensive LNG,” he said.

Shell released a short statement saying LNG cargoes from Prelude had resumed and the company was focused on performance over the long term.

It is a focus that is supported by Dr Aguilera’s own research into long-term global LNG demands.

“They are betting that natural gas consumption will rise over the long term and it will be a part of a lower-carbon future,” he said.

“It’s been shown in our analysis that natural gas can, in fact, lead to deep decarbonisation of the energy system, to the extent that it displaces coal in electricity generation.”

Floating LNG processing has been touted as having environmental benefits, both in producing LNG resulting in less greenhouse gases than burning coal and in increased efficiencies and not requiring the clearing that land-based facilities may involve.

Former Howard government adviser, business leader and environmental activist Geoff Cousins promoted floating LNG as an acceptable alternative in his fight against the construction of land-based LNG processing on the Kimberley coast at James Price Point.

“I’m delighted that it won’t go ahead at James Price Point … it may well go ahead, however, with the floating [gas facility] option, and that would be terrific,” Mr Cousins told the ABC in 2013.

Publicly available information on the greenhouse gas emissions of the Prelude facility is limited to the financial year ending June 2019, at which point the facility had only produced one LNG shipment.

The Clean Energy Regulator records that Prelude produced 2.3 million tonnes of carbon dioxide equivalent emissions in that year.

Mr Cousins said that while floating LNG had less environmental impacts than clearing land for a facility in the Kimberley, Prelude’s environmental performance and economic challenges required radical action from Shell.

“That’s what they should do as business people, as members of the community they shouldn’t be developing it anyway.”

He rejects the argument that LNG can help reduce greenhouse emissions by displacing coal.

“That argument is a lot of nonsense. LNG is no longer required for that purpose,” Mr Cousins said.

“The massive development in storage of solar energy in particular, and wind and so on, means there is no significant need for this anymore.”

While Dr Aguilera disagrees with this assessment, he does suggest that it is essential that Shell reduces the greenhouse emissions of Prelude.

“I could imagine that a company like Shell with this project, would be a paying attention to that, and realising that it’s extremely important these days to act responsibly and to reduce emissions,” he said.

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