Summary
Royal Dutch Shell PLC ("Shell") is proceeding with their Floating LNG Exploration Production Storage and Offloading project ("FLNG") off the coast of Northwestern Australia. The Shell FLNG will be the world's largest vessel, larger than any of our latest aircraft carriers. Shell has ordered one 3.5 mta (0.45 bcfd) FLNG from Samsung with prospects for ten more orders in the order of $5 billion per FLNG.
Analysis
During the environmental struggles of the Gorgon-Jansz project we thought the Shell FLNG would be a realistic Plan B for the JV of Chevron, Exxon and Shell. Since all roadblocks have recently been removed and the land based Browse island LNG plant project will proceed, Shell can now deploy their FLNG in their independent Browse field stakes of Prelude and Concerto. While the project cost of Gorgon-Jantz is in the order of $20bilion/bcfd Shell projects a significant lower cost of $11billion/bcfd for their FLNG.
The Shell FLNG decision underlines the difference of strategies between Exxon and Shell:
- Exxon wants large NG-LNG projects - like in Qatar with trains of 1bcfd+ - while Shell is investing in 0.45 bcfd FLNG offshore stranded gas projects such as abundant in northern Australia, Indonesia and off Brazil
- Exxon wants to monetize the economy of scale and will not invest in a shotgun type of approach in marginalr projects available all around the globe
Of course, Shell's FLNG decision has to be applauded and could resolve environmental LNG issues on the U.S. East and West Coast.
Hans Linhardt consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
