Unlocking Australia’s energy future

WITH interests in a string of developments and $30 billion worth of project investment, Shell Australia has both upstream and downstream operations.
Active in Australia since 1901, the company’s upstream business involves gas exploration, production and commercialisation, from which it supplies LNG, condensates and LPG to overseas markets and natural gas to WA.
Shell’s downstream division manufactures about 25 per cent of Australia’s petroleum products from its two refineries in Clyde, NSW and Geelong, Victoria.
The company is currently under the innovation spotlight due to its commissioning of the Technip Samsung Consortium to construct the world’s first floating LNG (FLNG) facility. Key to unlocking stranded gas reserves far out in the ocean, the FLNG vessel is being built at a shipyard in South Korea and has been labelled a ‘game changer’.
Upstream
In August 2010, Shell and a PetroChina subsidiary bought Arrow Energy in a 50/50 joint venture. Spurred by rising global demand for gas as a cleaner source of energy, the acquisition was worth $3.5 billion and added another
dimension to Shell’s gas portfolio.
Another of the company’s most important assets is its 24.27 per cent stake in the North West Shelf project: Australia’s largest resource development.
Operated by Woodside Petroleum, the project represents a $27 billion investment. It is owned by six companies, the other four being BP, BHP Billiton Petroleum, Chevron and Japan Australia LNG (MIMI).
Underpinned by vast natural gas and crude oil reserves in the Carnarvon Basin, the project provides about 65 per cent of WA’s total gas production, and accounts for more than 40 per cent of the country’s oil and gas production. The first shipment of LNG from the project was delivered to Japan in 1989. Shell also has a 25 per cent interest in the Chevron-operated Gorgon project, one of the largest natural gas exploits in the world.
The project will develop the Gorgon and Jansz/Io gas fields, more than 130km offshore WA, and include a 15 million tonne per annum LNG plant on Barrow Island and a    domestic gas plant.
A final investment decision (FID) for Gorgon was announced in September 2009, and first gas is expected by 2014. Gorgon’s other shareholders are ExxonMobil, Osaka Gas, Tokyo Gas and Chubu Electric Power Company.
Also operated by Chevron, the Wheatstone project is currently in construction and will encompass an LNG plant at Ashburton North in WA. Shell holds a 6.4 per cent stake in Wheatstone, with Apache, KUFPEC Australia and Kyushu Electric Power Company the other partners.
Wheatstone will include two LNG trains with a combined capacity of 8.9mtpa and a domestic gas facility that will process gas from the offshore Wheatstone, Iago, Julimar and Brunello fields. FID was announced in September last year, and first gas is scheduled for 2016.
Shell also has stakes in the Woodside-operated Sunrise joint venture and Browse LNG assets, which are both awaiting FIDs.
New gas
On October 14, Shell spudded a new gas exploration well in WA’s Exmouth sub-basin as part of its commitments to the Australian Government.
The well, Palta-1, is 70km off the North West Cape in WA-384-P. According to an ASX release from Octanex, which holds residual rights in WA-384-P including a 1 per cent royalty on any production within the permit, the semi-submersible rig Noble Clyde Boudreaux will drill Palta-1 to water depths of roughly 1300m, with a possible total depth of more than 5000m. Drilling is expected to take between two and three months.
In a fact sheet, Shell stated that the Exmouth sub-basin was an important region for oil and gas production in Australia, accounting for about 40 per cent of the county’s crude oil production.
However, the drilling plans caused some controversy because the well site is about 50km from the 260km-long Ningaloo Reef: one of the longest fringing barrier reefs in the world and the only one that occurs on the western side of a continent.
In June 2011, the Ningaloo coast was inscribed on UNESCO’s World Heritage List. Shell received environmental approval from the Federal Government for the drilling of Palta-1 the following month, and reported that as a gas exploration well, Palta-1 would allow it to better understand the gas resources present in the area. Any future activities would be dependent on the outcome of Palta-1 drilling and subject to a new approvals process.
“Shell recognises the significant biodiversity and heritage values of the Ningaloo region and is committed to operating the well safely and without adverse environmental impacts,” the company stated in a fact sheet.
Shell has pledged not to operate support vessels through the Ningaloo coast World Heritage area (unless during an emergency) and will ensure that arrangements are in place to minimise interaction with whales.
In addition, it will deliver a conservative well design supported by multiple safety barriers and a well-capping system. “While prevention is our first focus, Shell’s oil spill contingency planning and well-capping technology gives ready access to a solution in the very unlikely event that a well control incident did occur,” Shell stated. The Palta prospect is estimated to contain up to 13.5tcf of gas.
FLNG facility
A design of mammoth proportions, Shell’s 488m-long FLNG facility will be the largest floating offshore structure in the world. In comparison the Titanic, once the largest ship to have ever been built, was 269m long. With full storage tanks, the 74m-wide FLNG facility will weigh 600,000t: six times as much as the largest aircraft carrier. About 260,000t of its weight will consist of steel: five times the amount used to construct the Sydney Harbour Bridge.
Shell announced its FID on the FLNG facility in May last year.
“Our innovative FLNG technology will allow us to develop offshore gas fields that otherwise would be too costly to develop,” Shell executive director of upstream international Malcolm Brinded said in a statement. “Our decision to go ahead with this project is a true breakthrough for the LNG industry, giving it a significant boost to help meet the world’s growing demand for the cleanest-burning fossil fuel.”
The facility was designed to withstand severe weather conditions, including category 5 cyclones. LNG offtake will be delivered to the market directly from the FLNG facility via ocean-going LNG carriers.
“This will be a game changer for the energy industry. We will be deploying this revolutionary technology first in Australian waters, where it will add another dimension to Australia’s already vibrant gas industry,” Shell in Australia country chair Ann Pickard said in a statement.
Moored 200km offshore WA in the Browse Basin, the FLNG facility will be used to commercialise the Prelude and Concerto gas fields, which are expected to contain a total of 3 trillion cubic feet of liquids-rich gas.
As it is not economically viable to develop stranded gas fields via conventional pipelines and an onshore processing plant, Shell’s FLNG technology could enable numerous gas production opportunities: CSIRO estimates that Australia has roughly 140tcf of stranded gas. The FLNG facility will deliver myriad economic benefits, adding more than $45 billion to Australia’s Gross Domestic Product and creating 1000 jobs.
In addition, it will contribute $12 billion in tax revenue and improve Australia’s balance of trade by at least $18 billion during a 25-year life cycle.
In a statement released at the time of the FID, WA Resources and Energy minister Martin Ferguson said that Shell’s decision to build the FLNG facility came after many years of hard work.
“It opens the door to countless new opportunities both here in Australia and around the world to use new technology that makes it more economical to develop remote deposits,” Mr Ferguson said.
“It is also important not to lose sight of the longer-term benefits Prelude will deliver. In addition to the jobs, increased revenue and opportunities for local companies it will create, Shell will also use Prelude to offer training, education and research opportunities in Australia.”
Mr Ferguson said that Prelude was helping to put Australia “securely on the road” to becoming the world’s second-largest exporter of LNG in the near future. Shell stated that FLNG technology was an important innovation for the LNG industry and would reduce project costs and environmental footprints because it negated the need for: long pipelines to shore; compression platforms; near-shore works such as dredging and jetty construction; and onshore infrastructure such roads, laydown areas and accommodation facilities.

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