BHP chief hits out at Browse options:
BHP Billiton boss Marius Kloppers has taken a thinly veiled swipe at the lease conditions set by governments for the Browse gas project, suggesting it was not ideal to be given only one site to investigate.
Controversy over the location of the $30 billion LNG plant has been running hot this week, after WA Premier Colin Barnett said he would try to force the proponents - Woodside Petroleum, BHP and Shell - to develop the plant on land at James Price Point near Broome in Western Australia.
Shell is understood to favour a floating LNG processing facility, and that option is also favoured by environmental and indigenous groups who believe James Price Point is too sensitive to host such a large industrial development.
Photo Damian Kelly
ACTION OF THE DAY
A MAJOR national bank has been forced to remove more than 100 misleading out of order signs from its ATMs after being targeted by anti-coal activists.
A MAJOR national bank has been forced to remove more than 100 misleading out of order signs from its ATMs after being targeted by anti-coal activists.
A score of ANZ Banking Group machines sprawled across six capital cities were plastered with "out of order" signs on Sunday after campaigners launched their latest bid to draw attention to the bank's funding of the coal industry.
Posts
ENERGY major Chevron says the huge Gorgon liquefied natural gas project being built on Western Australia's Barrow Island remains a profitable venture despite a cost blowout and delay expected to be announced next week.
ReplyDeleteIt is understood the updated estimate of the $43 billion project cost will be less than $60bn, with the blowout closer to $10bn than $20bn.
..
Chevron chairman and chief executive John Watson confirmed that the project's costs had risen since the previous estimate of $43 billion. It is expected that next week it will be announced the project's cost has escalated to somewhere below $60 billion.
Besides the cost blowout, it is expected that the project's plan to begin LNG production in 2014 will also be delayed.
Earlier this week, Chevron Australia chief Roy Krzywosinksi slammed the Australian government's carbon tax, saying it and other policies are decimating confidence in major capital investments in Australia.
If Chevron follows through with its expected announcement next week, Gorgon will become only the latest resources project in Australia to face cost blowouts and construction delays. Just this past week, Rio Tinto and BHP Billiton announced cuts to capital spending and reduced cost bases in order to protect profits in light of rising costs and project delays.
........................
SIX weeks ago at a giant shipyard on the South Korean island of Geoje, an event occurred that seems likely to forever change the face of Australia's booming liquefied natural gas industry.
It was then that the first steel for Royal Dutch Shell's gargantuan Prelude floating LNG facility was cut at the Samsung Heavy Industries factory, marking the start of construction of a vessel that is a genuine world first.
..........................
Midwest temperatures are above-normal for the region for this time of year, which has curbed demand for heating fuels, especially natural gas.
Driven by the supply increase and forecasts for continued mild weather, natural gas futures plummeted over forty cents per million British thermal units (MMBtu), a drop of more than 10%. Despite low prices, U.S. natural gas production continues to rise, with 2012 production projected to be 4% higher than 2011. Some analysts warn that another warm winter, coupled with strong natural gas production, could cause supplies to overrun storage capacity in the United States by next fall.
.........................
Capital Economics estimates oil will average $80 per barrel next year, which would be the lowest level since 2010, when crude averaged $79.84.
..
Natural gas prices are near where they were at the beginning of the month, though trading was volatile. Natural gas rose to nearly $4 per thousand cubic feet for the first time since September of 2011 on expectations of a cold winter and an increase in heating demand.
Then prices tumbled back down this week when forecasters said early December temperatures should be warm and the Energy Department reported that national supplies of natural gas grew at a time when usually they fall.
............................
Thanks to Goolarabooloo for this full transcipt of the above article :"SIX weeks ago at a giant shipyard on the South Korean island of Geoje, an event occurred that seems likely to forever change the face of Australia's booming liquefied natural gas industry".
ReplyDelete............
This is significant!!
MINING & ENERGY: Prelude opens a new chapter for liquefied natural gas industry -Colin Barnett and Ann Pickard disagree over Shell's proposal for the Browse project.
SIX weeks ago at a giant shipyard on the South Korean island of Geoje, an event occurred that seems likely to forever change the face of Australia's booming liquefied natural gas industry.
It was then that the first steel for Royal Dutch Shell's gargantuan Prelude floating LNG facility was cut at the Samsung Heavy Industries factory, marking the start of construction of a vessel that is a genuine world first.
The 7.6 tonnes of steel cut that day for Prelude was a tiny part of the overall 260,000 tonnes -- about five times more than was used to build the Sydney Opera House -- that will be needed to build the vessel.
When completed in 2016, Prelude will be 488m long and 74m wide and will weigh more than 600,000 tonnes.
The revolutionary FLNG vessel the first of many Shell says it is planning to build will be towed from South Korea to a location about 200km from Western Australia's Kimberley coast, smack bang in the middle of the highly prospective Browse Basin.
Prelude will process the rich hydrocarbons from the Prelude field into LNG and the finished product will then be loaded on to tankers for export to markets around the world.
Prelude is a potential game changer because the processing of offshore gas reserves has, until now, involved piping the gas to a plant on the coast.
As Shell has argued, the FLNG technology being used for Prelude will open up lucrative gasfields considered too small to warrant development or too difficult to develop onshore.
With offshore terminals like Prelude, there is no need for building long pipelines to shore, compression platforms to push the gas to shore or environmentally sensitive works such as dredging and jetty construction.
And there is no need for an onshore gas processing plant or associated infrastructure such as roads and accommodation.
Since Shell announced its final investment decision on Prelude last year, five more potential FLNG projects around the world have entered the planning phase.
"FLNG technology is an important development for the LNG industry as it reduces both the project costs and environmental footprint of an LNG development," Shell says.
It's against this backdrop that an almighty row broke out this week between Shell Australia boss Ann Pickard and WA Premier Colin Barnett over Shell's mounting push to roll out its FLNG technology for the Woodside Petroluem-led Browse project.
The Browse gasfields known as Torosa, Brecknock and Calliance are located in the Browse Basin, about 100km south of Prelude.
The fields boast about 15 trillion cubic feet of gas far more than Prelude's 3 tcf.
cont...
ReplyDeleteBarnett says he will only allow Woodside and Shell the dominant players in the venture with equity of almost 60 per cent to develop Browse via an onshore gas plant on the Kimberley coast, even if that option is not the most commercially viable.
Using FLNG for Browse would end the environmental controversy over the use of James Price Point, 60km north of the tourist town of Broome.
But it would also mean that Kimberley indigenous people would lose access to a $1.5bn benefits package if their land at James Price Point was not needed for the project.
And WA would miss out on thousands of construction jobs and state revenue in the form of payroll tax.
Woodside, Shell and the other Browse partners BHP Billiton, BP, Mitsubishi and Mitsui are studying the viability of processing the gas in the Kimberley and will announce within months whether they will go ahead with the plan.
But it's difficult to see how the economics of James Price Point will stack up once all the numbers have been crunched.
Investment bank JPMorgan estimated in a report last month that FLNG would cost the Browse partners $US35.5bn compared with an estimated $US44.6bn to build a greenfields plant at James Price Point. Unfortunately for Barnett, he appears to be one of the last remaining passionate supporters of James Price Point.
Woodside Petroleum chief executive Peter Coleman is known to be keeping an open mind on the issue and Woodside executives are privately scathing about Barnett's attempts to force the company into a development option that may not deliver the most value to shareholders.
Geoff Cousins, a Telstra director and strong opponent of the James Price Point option, says Barnett is now "completely isolated" in his position.
"All the financial markets have completely abandoned the idea that James Price Point is the right place to process the Browse gas, there isn't a single analyst I know of who believes that," he says.
"Premiers can say what they like, and he's saying a lot of very strange things, but sooner or later these things do not go ahead unless financial markets back them," Cousins says.
David Hewitt, co-head of global oil and gas for Credit Suisse, is sceptical about the view that FLNG will be cheaper than James Price Point and says the most likely development option for Browse is for the gas to be piped several years from now to existing LNG facilities in the Pilbara.
"I think it's a capital N and a capital O," he says of James Price Point.
"Support for the project being based on the Kimberley seems to have dwindled to a lone voice on St Georges Terrace.
"The economics don't stack up. I've never believed in James Price Point and I absolutely don't believe in it right now. The natural destination of those molecules is to an existing onshore facility, which is basically North West Shelf or Pluto."
I like these :
Delete..
Barnett says he will only allow Woodside and Shell the dominant players in the venture with equity of almost 60 per cent to develop Browse via an onshore gas plant on the Kimberley coast, even if that option is not the most commercially viable.
..
But it's difficult to see how the economics of James Price Point will stack up once all the numbers have been crunched.
..
Unfortunately for Barnett, he appears to be one of the last remaining passionate supporters of James Price Point.
..
Woodside executives are privately scathing about Barnett's attempts to force the company into a development option that may not deliver the most value to shareholders.
..
Geoff Cousins, a Telstra director and strong opponent of the James Price Point option, says Barnett is now "completely isolated" in his position.
"All the financial markets have completely abandoned the idea that James Price Point is the right place to process the Browse gas, there isn't a single analyst I know of who believes that," he says.
"Premiers can say what they like, and he's saying a lot of very strange things, but sooner or later these things do not go ahead unless financial markets back them," Cousins says.
..
"I think it's a capital N and a capital O," he says of James Price Point.
"Support for the project being based on the Kimberley seems to have dwindled to a lone voice on St Georges Terrace.
..
But I think my favourite is :
"Premiers can say what they like, and he's saying a lot of very strange things..."
Just looking at that and where we are today,I thought it might be worthwhile looking at some old headlines and warnings.
ReplyDelete..
SEPT 11 2010. THE AGE.
SHELL Australia chairman Ann Pickard has warned Woodside and the West Australian government not to ''back stakeholders into a corner'' in developing the $30 billion Browse liquefied natural gas project.
..
NOVEMBER 2010. WOODSIDE INVESTORS.
BHP Billiton, which has an 8.33 percent stake in the project, has been the most outspoken of the joint-venture partners.
In November 2010 BHP chairman Jac Nasser told shareholders: “We won’t proceed with any development where our values and standards are compromised in any way.”
In May 2010 BHP petroleum boss Michael Yeager told investors that he would have preferred to have been able to also investigate the case for using the gas to backfill the North West Shelf and not to duplicate infrastructure.
He said he also had concerns about overcoming the size and length of the pipeline to the coast, a high amount of carbon dioxide in the gas and a soft ocean floor.
“As you know, it’s really three fields offshore, very complex, a long way from the beach, about 14 trillion cubic feet.
..
PINDAN POST.
In 2009 Woodside’s then chief executive Don Voelte convinced federal Resources Minister Martin Ferguson it was in Australia’s best interests to develop the Browse gas as early as possible and not wait to use the existing facilities at Karratha.
At the time Woodside was negotiating a 15- to 20-year supply agreement with PetroChina, touted as Australia’s largest single export deal worth an estimated $45 billion, but that deal fell through.
Unusual retention leases
In December 2009 the joint-venture partners found out that to retain rights to the Browse fields they would have to sign what one commentator described as “unusually proscriptive and binding terms of a collection of retention leases” that involves the development of James Price Point, unless they could find an alternative likely to be “commercially viable at an earlier time”.
Delivering a viable proposal over a reduced timetable would be almost impossible, so the joint venture partners were forced into deciding to agree to James Price Point or losing their rights to the gas discoveries.
...Federal Environment Minister Tony Burke was initially expected to make a final decision on the project in June 2011. However, the Minister’s decision has been pushed back repeatedly and is now unlikely to be made before the first quarter 2013.
It is now improbable that James Price Point project will reach its target production date in 2017. A production date just a few years beyond 2017 will erode the time value advantage which the James Price Point project previously enjoyed over the option of processing the gas at existing facilities at the Northwest Shelf.
Projects face delays
The project is already threatened by the possibility of lengthy delays from skilled labour shortages, protests and likely legal action over landholder agreements and environmental or heritage impacts.
And almost all big gas projects approved in Australia since 2000 have been hit by delays and cost blowouts. Macquarie said in December 2010 Australia’s mega-projects, on average, have been 32 per cent more expensive than when approved and have been completed eight months later than expected.
.. The biggest project approved in Australia, the $43 billion Gorgon LNG project on Barrow Island, began running late just 18 months into a five-year construction period.
.. Shell has already said the project could cost as much as Gorgon, and some journalists are now reporting $50 billion.
There are also questions over the demand for LNG especially in the face of growing competition from cheaper coal-seem and shale-gas options.
As analyst Mark Greenwood noted in a JP Morgan research report of December 2009: “There is significantly more proposed LNG capacity compared to the likely demand.” (From the Wilderness Society)
“As you know, it’s really three fields offshore, very complex, a long way from the beach, about 14 trillion cubic feet."
ReplyDeletePrelude is 3 trillion cubic feet.
This is another of Barnetts lies.He likes to say the Woodside Browse gas fields are too big for FLNG.That FLNG is only good for small fields like Prelude.
Well obviously he is lying as usual.
Because 14 divided by 3 is 4.6 - so on average the 3 fields - Brecknock, Calliance and Torosa - are about the same size as Prelude.
Ideal for FLNG.
"In 2010, the Browse LNG project was at the centre of a stoush between Woodside and its then joint venture partners, BHP Billiton, Chevron, BP and Shell, about whether to develop the gas fields through Woodside's preference of a new plant at James Price Point or delay development until reserves ran low at the North West Shelf project to the south.
Woodside, under then chief Don Voelte, won the stoush with the help of WA Premier Colin Barnett and federal Resources Minister Martin Ferguson, who forced the partners to abandon thoughts of backfilling the shelf project and instead investigate whether James Price Point was viable.
A decision is due in the middle of next year, but most analysts expect the outcome to be that an onshore plant will not be built."
"Illustrating the hurdles to development at Browse is the length of time that has passed since Woodside's three big discoveries that underpin the Browse project - the gas was found in 1971. This was the same year the first discoveries in the Carnarvon Basin to the south were made and which underpinned the 1980 approval of the North West Shelf LNG project, which processes gas at Karratha.
What has hampered development of the Browse Basin compared to the Carnarvon (which also now hosts the completed or under way $43bn Gorgon project, the $16bn Pluto project and the $34bn Wheatstone project) is the more than 300km of water that needs to be crossed to get to the mainland and the depth of the water, which ranges from 300m to 500m.
This is what is making floating LNG, which is ideal for hard-to-reach and smaller fields, a potential game-changer.
The biggest gas opportunities are in the West Browse, where the Browse project, with 14 trillion cubic feet of gas, and the ConocoPhillips/Karoon-owned Poseidon field, which is thought to hold around seven trillion cubic feet or more, sit. The central Browse is where the action is happening: Inpex is in construction of Ichthys and Shell is building the world-first Prelude.
In the eastern Browse lie smaller opportunities that some proponents say could potentially be grouped together for another FLNG development."
This post was definitely worth the time to read and take in. Most times I read a post I just skim over the contents, but not this one. Good job!
ReplyDelete-------------------------
Website design | Website design Adelaide | Website design Brisbane