Image: Shell Australia.
BY REUBEN ADAMS
2018 will be the year of oil and gas revival, as prices kick higher and major Australian projects – including Prelude FLNG – finally come online.
This will be the year that Australia finally takes the LNG crown from Qatar.
Exports are forecast to reach $35 billion, driven by Chevron’s second Wheatstone LNG train coming online in Q2, Inpex’s Ichthys project ramping up production, and Shell’s Prelude approaching full operation.
The timing is good – 2017’s cautious positivity has evolved into growing industry confidence in 2018, according to a new study by DNV GL.
DNV GL’s latest industry outlook report, which surveyed 813 senior industry professionals and executives globally, found that 63 per cent of poll participants were confident about growth in the industry this year. This figure stood at 32 per cent a year ago.
Shell has laid the groundwork for sustainability, delivering 11 major projects starting production since early 2016 which have added an average of 500,000 barrels of oil equivalent per day of peak production.
The company also completed $23 billion in divestments at headline level, including its share in Woodside, the Motiva split, and the exit from Showa Shell, just to name a few.
In a late November investor briefing chief executive Ben van Beurden said four quarters rolling free cash flow at Q3 2017 was $27 billion, at an average $51 per barrel.
“Over the last few years we have established tremendous clarity of purpose – inside the company and I trust also for our stakeholders,” he said.
“Over the last 12 months we have reduced net debt by more than $10 billion, and gearing now stands at around 25 per cent. That is down from some 29 per cent a year ago.”
Shell, along with a number of its peers, is also betting on rising demand for LNG in the medium term.
The delivery of new projects continues, with Shell on track to deliver an incremental $5 billion cash flow from operations by 2020.
One of these operations is the 488m-long Prelude floating liquefied natural gas (FLNG) facility, about 475km north-north east of Broome in Western Australia.
Mr van Beurden has signalled that the project would start contributing markedly to cash flow in 2019.
“Beyond 2018, in the 2019-2020 period I would expect another $US5 billion additional cash flow from operations,” Mr van Beurden told investors in November.
“This would then include further start-ups in Brazil, the Gulf of Mexico and the ramp-up of Prelude and others.”
Shell Australia Chairman Zoe Yujnovich said the arrival of the Prelude FLNG facility in Australian waters in July last year signalled a new era for the Australian LNG export industry, with the first floating liquefaction facility deployed in local waters.
Shell had awarded most Prelude contracts to Australian contractors, including Australian engineering company Monadelphous for maintenance and modification services valued at $200 million. WA-based CIVMEC constructed the four massive anchor piles for Prelude’s subsea flowlines from its Henderson facility.
The company also partnered with South Metropolitan TAFE in WA to develop specific training for Prelude technicians.
The Prelude project will employ 260 local workers on board the facility during operations, and 1500 during the hook-up and commissioning phase of the project.
In November, Shell announced that it had recently completed the installation of the thrusters, allowing Prelude to weathervane around its turret.
This is a key feature in Prelude’s design, to ensure she can withstand wind and sea conditions, including a one-in-10,000-year storm.
This milestone marked the completion of work for the five POSH tugs, which were critical in keeping Prelude on station since safely towing Prelude from Geoje to Australia in July.
Under the sea, the installation of Prelude’s subsea infrastructure was completed in early November with all 16 FLNG mooring lines, two umbilicals and four flexible risers installed.
The water intake risers, which provide cooling water crucial to FLNG production, were constructed offshore in September.
They will displace up to 56,000sqm of water per hour from a depth of 150m – enough to fill more than 22 Olympic swimming pools in an hour. This was followed by the completion of the water intake riser hypochlorite distribution system, which protects the water intake risers from bio-fouling and ensures the seawater pumps provide the flow necessary to cool LNG production.
Prelude project director Didrik Reymert said the hook-up and commissioning phase of the project was progressing well.
“…I am pleased we have completed the major marine operations. It is now about focussing on commissioning,” he said.
VP Prelude David Bird said it was critical “we do not lose focus”.
“There is still a significant amount of work ahead of us, and the priority is to complete this work safely and bring a reliable asset online.”