Australia Pushes FLNG Developments

Posted: 12/03/2009

"Australia is blessed with enormous gas potential, one that will take us well into the next century and probably one or two well beyond that," said David Knox, chief executive of Santos in a speech last month.

Speaking to the committee for the economic development of Australia, he argued the case for natural gas as an energy source, highlighting its "substantial but often ignored potential … in a carbon-constrained world."

Just as Tony Hayward, chief executive of BP, did before him and Rex Tillerso, chief executive of ExxonMobil has done since, he stressed that natural gas can be a major part of reducing CO2 emissions associated with energy extraction and consumption going forward.



"Gas is the fuel that offers the greatest potential to provide the largest CO2 reductions at the lowest cost–using technology that's available today," Knox said.

Natural gas already has significant penetration in Singapore, Thailand, Malaysia, the Netherlands, Italy and the UK, where just under 40 percent of electricity is generated using the source.

In Australia, this figure is just 8.6 percent and Knox stressed that this could–and should–change, highlighting the environmental and economical benefits of natural gas.

GDF Suez and Santos Partnership

His speech follows the signing of a strategic partnership between his company and GDF Suez in August, which marked a major step towards developing a floating liquefied natural gas (FLNG) project.

The two firms are working to move forward the FLNG potential in the Bonaparte Basin in Australia. Santos sold a 60 percent interest in the Petrel, Tern and Frigate gas fields in the area to GDF Suez for $200 million (£120 million).

GDF Suez will lead the development of Bonaparte LNG, a proposed two million tonnes per annum FLNG project, as well as the marketing of the gas. The company will also ship the LNG to markets in the Asia-Pacific region in accordance with the terms agreed under the unincorporated joint venture.

Santos stands to earn a further $170 million on top of the $200 million it has already received if a final investment decision to develop the assets produced as part of the FLNG project is made.

GDF Suez will also take on Santos' share of the front-end engineering and design (FEED) development costs for the FLNG project, plus invest in FEED efforts for the Petrel, tern and Frigate offshore gas fields, which includes two appraisal wells.

The French firm said that Bonaparte LNG would help it to make the most of the considerable work it has already done towards advancing FLNG technology and terminals, both in terms of LNG liquefaction and regasification through in-house research and development and international partnerships.

"In GDF Suez, we have chosen a leader in the gas and LNG industry and a company with the technical capacity to develop a floating LNG project as our partner," said David Knox.

"Further optionality exists in Santos' other Bonaparte Basin assets, namely the Evans Shoal, Barossa and Caldita fields. We will now consider commercialisation options for these assets," he added.

Shell's FLNG Project

More recently, Shell announced that it plans to develop its gas discoveries in the Prelude and Concerto fields in the Browse Basin off the north-west coast of western Australia, using its FLNG technology.

Shell claims its FLNG innovations are an "important development" for the LNG industry, as the company is able to process gas "in situ" over an offshore gas field. This reduces project costs and environmental effects, according to the firm.

Malcolm Brinded, executive director of upstream international at the company, said: "Shell is excited to be progressing with FLNG technology, which has the potential to unlock some of Australia's 'stranded' gas reserves that have previously been considered uneconomic to develop because of their small size or distance from shore."

"FLNG technology adds to Shell's LNG leadership–we are already the largest LNG marketer amongst the international oil companies, and are technical advisor to many of the world's LNG facilities," he added.

The project is currently in the FEED phase, which is being undertaken as part of Shell's contract with Technip-Samsung for the design, construction and installation of numerous FLNG facilities over the next 15 years.

Shell expects to start production from the FLNG plant in the Bonaparte basin by 2016 and estimates that it could generate up to 3.6 million tonnes of LNG per year, plus 1.3 million tonnes of condensate and 0.4 million tonnes of liquefied petroleum gas.

Posted: 12/03/2009

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