Royal Dutch Shell's Prelude FLNG facility in Australia has started production of natural gas and condensate, paving the way for the first cargoes of LNG, LPG and condensates to be shipped in coming months.
Prelude FLNG will be the last of the Australian LNG megaprojects to hit the market, catering largely to Asian gas demand and making the country one of the world's largest LNG exporters, jostling with Qatar for the top spot.
Shell said in a statement Wednesday that the wells at Prelude FLNG have been opened and the facility "now enters start-up, ramp-up, which is the initial phase of production where gas and condensate is produced and moved through the facility."
"Once this has concluded, the facility will be stabilized for reliable production of LPG and LNG," the company said, adding that the focus is on "providing a controlled environment to ensure Prelude will operate reliably and safely now, and in the future."
Prelude FLNG was one of the most anticipated LNG projects in recent years due to the deployment of the world's largest floating facility, with a production capacity of 3.6 million mt/year of LNG, 1.3 million mt/year of condensate and 0.4 million mt/year of LPG.
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The facility, located 475 kilometers north-north east of Broome in Western Australia, is operated by Shell with a 67.5% stake, followed by Japanese explorer INPEX with a 17.5% stake, South Korea's KOGAS with a 10% stake and Taiwan's CPC Corp. with 5%.
Inpex said its equity portion of LNG from Prelude will be supplied to Jera and Shizuoka Gas, at around 0.56 million tons/year and 0.07 million tons/year respectively, when production volumes plateau, to provide stable supply of energy to Japan.
Prelude FLNG is the first FLNG project in Inpex's portfolio and the impact of the commencement of production on consolidated financial results for the year ending March 2019 is minimal, Inpex said in a statement separately.
SHELL'S GAS STRATEGY
With Shell as the largest stakeholder in Prelude, the bulk of the LNG produced is expected to go into the company's LNG portfolio, adding to its volumes from other Australian projects like Gorgon LNG and Shell-operated Queensland Curtis LNG.
The natural gas business has become key to the oil supermajor's long-term energy strategy, especially after the multi-billion dollar acquisition of BG Group, making it one of the largest players in the market.
Shell recorded LNG liquefaction volumes of 33.2 million tons and LNG sales volumes of 66.0 million tons in 2017, according its latest annual report. Comparatively, global LNG imports in 2017 touched 289.8 million tons, according to the International Group of LNG importers or GIIGNL.
"Over the last couple of years we really moved our Integrated Gas business from being a growth property into a cash engine," Mark Gainsborough, head of Shell's New Energies business, said at a briefing last week.
Shell had taken final investment decision on Prelude FLNG in May 2011 and while the company has never disclosed the capital expenditure on the project, industry sources have indicated a capex of over $12 billion and said the complex nature of the project led to some capex overruns and delays.
The project is starting up in a weak LNG market due to mild winter demand with the Platts JKM for cargoes for delivery in February assessed at $9.10/MMBtu last week, hurt by falling oil prices and ample supply.
Prelude FLNG will be moored at the gas field for 25 years. It is longer than four soccer fields laid end to end and when fully loaded weighs roughly six times as much as the largest aircraft carrier in service.
