Page 9 - AsianOil Week 03 2021

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tonnes per year (tpy) of carbon dioxide (CO2) “Prelude has been a ‘white elephant’ – we
under Barrow Island. Instead, more CO2 is being always felt it was a technology looking for a solu-
vented into the atmosphere. tion rather than the other way round,” a Bern-
According to the Boiling Cold report, stein analyst, Neil Beveridge, was quoted by the
which has since been picked up by interna- Financial Times as saying. He added that there
tional media, the Western Australian Depart- were numerous competing onshore LNG pro-
ment of Mines, Industry Regulation and Safety jects proposed that did not require such expen-
(DMIRS) allowed Chevron to begin injecting sive, pioneering technology as that necessary for
CO2 in August 2019 without the pressure Prelude. As a result, very few large-scale FLNG
management system, provided it started projects are going ahead, Beveridge noted.
operating by December 2019. It subsequently Indeed, Shell cancelled orders for three FLNG
granted a series of extensions to this deadline, facilities from Samsung following a decision in
and Chevron now has until June 2021 to fix the 2016 by Woodside to scrap its plans to jointly
system. However, this time the DMIRS capped develop a Western Australian gas field using FLNG.
the amount of CO2 Chevron could inject in The same year, FLNG projects backed by Cana-
the meantime, leading to more CO2 being da’s AltaGas and Belgium’s Exmar in Canada and
vented. The cap has not been disclosed. Colombia were scrapped, with poor market con-
Western Australia’s state government has ditions cited as the reason for the moves.
come under fire from environmental groups Shell has not disclosed the cost of Prelude,
for not imposing penalties on Chevron and but the Financial Times cited analysts as saying
its partners in Gorgon over the malfunc- it had risen to AUD17bn ($13bn).
tioning of the CCS facility. Indeed, The “The industry FLNG ambition to ‘design one
Conservation Council of WA said Chevron build many’ has unfortunately become ‘design
should be forced to shut the plant down many build one’ in some quarters following dis-
until it can demonstrate its CCS system was appointing project execution,” a Credit Suisse
working. Chevron, for its part, maintains analyst, Saul Kavonic, was quoted by the Finan-
that the CCS facility is working safely and cial Times as saying. “Only more modest niche
that the company is committed to meeting applications are now seen as plausible.”
its regulatory obligations.
The CCS project is the largest in the world, What next?
and the ongoing challenges with it comes as CCS The prolonged outage at Gorgon Train 1 comes
is increasingly being looked at as a major com- as LNG spot prices in Northeast Asia have risen
ponent of the energy transition and decarbonisa- to record highs on seasonal winter demand and
tion. While the technology is evolving and being some supply shortages. Just nine months ago,
honed, Chevron’s CCS struggles may give other in late April, Northeast Asian spot prices fell to
would-be developers of the technology cause for record lows of around $1.675 per million British
concern. thermal units ($46.33 per 1,000 cubic metres).
However, last week the Japan-Korea Marker
Floating giant (JKM) benchmark set a new record of $21.45
Shell, meanwhile, had more positive news to per mmBtu ($593.31 per 1,000 cubic metres).
report as it returned its giant Prelude floating This week, it rose further still to a new all-time
LNG (FLNG) project to service. The facility – the high of above $30 per mmBtu ($829.80 per 1,000
largest floating structure ever built – had been cubic metres).
offline for almost a year owing to a technical dis- “Given limited supply flexibility, sup-
ruption to its diesel generators that illustrates the ply outage risks and large demand swings,
complexity of FLNG technology. when the LNG market risk skews short it can
Analysts have said that the remote location send prices skyrocketing for short periods,”
of the Prelude facility, 475 km off Australia’s west Kavonic was quoted by the Australian Finan-
coast, as well as restrictions related to the corona- cial Review as saying.
virus (COVID-19) pandemic have complicated The impact of the outages at Gorgon has
Shell’s efforts to restart operations. Nonetheless, been somewhat limited by Chevron only tak-
the super-major said that as Prelude is a mul- ing one train at a time offline for maintenance.
ti-decade project, its focus in on sustained per- Prelude’s return to the market, meanwhile, will
formance over the long term. be welcomed by buyers at this point. However,
However, Shell has backed out of other FLNG questions remain over whether the short-term
projects, as have other producers, likely deterred price spike will translate into greater confidence
by witnessing the challenges at Prelude, which among LNG developers over longer-term mar-
included cost overruns as well as technical issues. ket conditions.™

Week 03 21•January•2021 www. NEWSBASE .com P9