JV greenlights delayed gas project

Shell

SHELL and its joint-venture (JV) partner SGH Energy have taken a final investment decision (FID) to approve development of the Crux natural gas field, off the coast of Western Australia.

Two years ago, it was reported that an FID on the project would be delayed. This came as Shell postponed a number of projects following a decision to reduce its capital spending by 20%. The now sanctioned Crux will provide backfill gas to Shell’s major floating LNG project Prelude, supplying up to 550m scf/d of gas. Wood Mackenzie research analyst Michael Song estimated the development cost at US$2.5bn.

Construction will start this year, and first gas is expected in 2027.

Tony Nunan, Chair of Shell Australia, said developing the project reinforces the company’s commitment to Australia, “including boosting the regional economy, creating jobs and providing training opportunities”. He adds that using Prelude’s existing infrastructure significantly reduces development costs, making Crux competitive and commercially attractive.

Wael Sawan, Director of Integrated Gas, Renewables and Energy at Shell, said the project will form an important part of the company’s integrated gas portfolio.

He added: “Natural gas from Crux will play a key role in helping Asian customers move from coal to gas as a cleaner-burning fuel. The project will help us to meet the increasing demand for LNG as the energy market transitions to a lower carbon future. The project will also boost our customers’ security of supply, which is becoming an ever more significant consideration for global consumers.”

This news comes during Russia’s ongoing war of aggression against Ukraine and restrictions that have reduced energy security and increased prices.

Song said that volumes from Crux are needed to ensure that Prelude produces at nameplate capacity into the 2030s. “With future supply secured, Prelude partners must ensure there are no further technical issues onboard the vessel and maintain stable production to take advantage of current LNG prices,” he said.

Prelude update

Shell resumed operations of Prelude in early April, after receiving approval to restart production. Operations were halted after a fire broke out in an electrical utility area, which was quickly caught and prevented from spreading. Initially, Shell said production would be halted until main power was restored. Later, the company reportedly attributed ongoing closure, in part, to difficulty giving specialists access to the platform due to Covid quarantine requirements.

The fire represented the latest in a series of setbacks for the 488 m long ship, which has production capacity of 3.6m t/y of LNG, 1.3m t/y of condensate, and 0.4m t/y of LPG. Issues included an earlier electrical issue in February 2020, which halted production until January 2021. Operations started in December 2018.

The Crux development will consist of a “not normally manned” platform operated remotely from Prelude. Five wells will be drilled initially, and a 160 m export pipeline will connect the platform to the floating LNG facility.