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High costs threaten Australia’s LNG market – Shell
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27th November 2012
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PERTH (miningweekly.com) – Oil and gas major Shell on Tuesday warned that Australia would need to re-evaluate its policy environment if it wished to retain its competitive edge in the global liquefied natural gas (LNG) market.

Speaking on the first day of the Deep Offshore Technology International Conference, in Perth, Shell country chair for Australia Ann Pickard noted that the country had the highest-cost LNG production in the world.

“Our global competitiveness is being threatened by lagging productivity and heavy regulations here in Australia. Australian LNG is the highest cost globally, with new entrants into the LNG export market, such as the US and Canada, delivering LNG into Tokyo Bay at 20% cheaper than we can from Australia,” Pickard said.

She noted that Australia needed to find solutions to the cost pressures and productivity challenges if it wished to retain its place as a possible rival for Qatar’s claim to being the biggest LNG producer in the world.

Pickard urged policy makers to address regulatory uncertainties in the LNG market, which she said were impacting on the industry’s ability to compete on the global markets.

“The government here has a chance to get a lot of the policy settings right. And if we don’t get the policy settings right, technology is not going to save the day, innovation won’t save the day.”

She noted that once the policy setting was favourable, the industry itself could look at introducing innovative solutions that could help reinvent the cost structures, regardless of the still-high labour costs.

“We need to innovate to ensure that our Australian interests remain viable. This includes the use of floating LNG technology, but also being innovative about how we phase our projects as well as in our contracting and purchasing agreements,” Pickard said.

Speaking to journalists on the sidelines of the conference, Pickard noted that Shell’s floating LNG technology had the potential to be the savior of the Australian LNG sector in terms of cost savings.

“Floating right now is likely the most cost-competitive entrant into LNG in Australia. Obviously, it will have to compete with the rest of the world, but we see it as the potential savior of the Australian LNG industry over the next decade or so.”

Shell was using its floating LNG technology at its Prelude operation, which was expected to deliver some 110 000 barrels of oil equivalent a day, underpinning at least 5.3-million tons a year of liquids, comprising 3.6-million tons of LNG, 1.3-million tons of condensate and 0.4-million tons of liquefied petroleum gas.

Edited by: Mariaan Webb

 

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Ann Pickard
 

Ann Pickard