WESTERN Australia is poised to further boost its global standing in the liquefied natural gas industry by becoming the world leader in revolutionary floating production facilities able to unlock trillions of cubic feet of previously stranded gas.
WESTERN Australia is poised to further boost its global standing in the liquefied natural gas industry by becoming the world leader in revolutionary floating production facilities able to unlock trillions of cubic feet of previously stranded gas.
Woodside Petroleum and its partners in the Sunrise gas and condensate project, 600 kilometres north of Wyndham in the Timor Sea, last week announced a floating LNG facility as their preferred option to develop the long-stalled project.
The selection of floating LNG over land-based alternatives in Darwin or Timor-Leste makes Sunrise the third major gas field in waters off WA to be earmarked for floating gas liquefaction facilities.
Late last year, fellow Sunrise partner Shell announced that its Prelude and Concerto gas fields in WA's Browse Basin would be the first Shell-operated fields in the world to be developed using floating LNG technology.
And in August, Santos announced a joint venture with French group GDF Suez to develop its Petrel, Tern and Frigate gas fields in the Bonaparte Basin, 200km north of Wyndham, using floating technology.
Developing viable floating liquefaction technology has been a major objective of the industry for two decades, mainly for the potential reduction in capital investment needed to establish production.
The capital intensive nature of conventional onshore LNG facilities has to date meant only those projects with sufficient reserves to support large-scale production for more than a decade have been considered viable.
Australia's largest existing LNG plant, the Woodside-operated North West Shelf, has so far cost $27 billion to reach its current capacity of 16 million tonnes a year, while the 15mtpa Gorgon project will cost $43 billion to develop. Both projects are based on initial reserves of more than 20 trillion cubic feet of gas.
In contrast, floating facilities should cost significantly less because they do not require infrastructure such as trunklines, port facilities and large-scale storage reservoirs. As an example, Shell expects its Prelude development to cost just $US5 billion and produce 3.5mt of LNG a year from 2016.
That makes floating LNG perfect for fields previously considered too small or remote for LNG development such as the 5tcf Sunrise field, and potentially others such as the Evans Shoal, Caldita and Barossa fields in the Bonaparte Basin, and BHP's Thebe field, 400km west of Karratha.
The trade-off is limited production capacity, with most current floating concepts targeting output of between 2mt and 4mt a year. That in turn limits the earnings potential of such assets.
Floating LNG also remains unproven at commercial scale and still faces numerous hurdles, including concerns over its ability to survive major cyclones and the potential environmental threat posed by large floating production facilities.
The Timor-Leste government also opposes the Sunrise proposal because it will not receive the same economic and employment benefits of a multi-billion dollar development onshore.
Floating LNG developments would also be beyond the reach of WA's domestic gas reservation policy, as the gas would never be brought to shore.