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Shell approves $2.5bn Crux project

30th May 2022

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Energy major Shell and its joint venture (JV) partner SGH Energy have taken a final investment decision to approve the development of the Crux natural gas field, off the coast of Western Australia.

Crux will provide further supplies of natural gas to the existing Prelude floating liquefied natural gas (FLNG) facility.

“This project forms an important part of Shell’s integrated gas portfolio,” said Shell integrated gas, renewables and energy solutions director Wael Sawan.

“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.”

“Developing the Crux project reinforces our commitment to Australia, including boosting the regional economy, creating jobs and providing training opportunities,” said Shell Australia chairperson Tony Nunan.

“The use of Prelude’s existing infrastructure enables significantly reduced development costs, making Crux competitive and commercially attractive.” 

The Crux field is in Commonwealth marine waters in the northern Browse basin, 620 km north-east of Broome. The development will consist of a platform operated remotely from Prelude. Five wells will be drilled initially, and an export pipeline will connect the platform to Prelude, which is around 160 km to the south-west of Crux.

Construction will start in 2022 and first gas is expected in 2027.

Advisory firm Wood Mackenzie (Woodmac) said that the development is expected to cost $2.5-billion and will produce 1.6 tcf of gas, 60-million barrels a year of condensate and 40-million barrels a year of liquefied petroleum gas. Crux will be produced through an unmanned platform tied back to the 3.6-million-tonne-a-year Prelude FLNG facility. 

“Crux has long been the leading candidate for providing new supply for Prelude FLNG. It has been a case of when rather than if the project would reach sanction, as the volumes are needed to ensure the FLNG facility produces at nameplate capacity into the 2030s,” said Woodmac research analyst Michael Song.

“A significant portion of the LNG will be lifted into Shell’s global portfolio. These volumes will supply growing Asian LNG demand, in support of coal-to-gas switching and lower carbon emissions.  

“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. First gas is targeted for 2027, which should be achievable given the small-scale upstream development. 

“In a global context, Crux is an example of the type of incremental, shorter-cycle, high-return development that the industry is targeting as it maintains capital discipline despite strengthening commodity prices. That being said, the volumes will enter the market at a time when we see significant new supply ramping up. Across 2026/28 we expect more than 100-million tonnes a year of new LNG supply to enter the market from Qatar, the US, Nigeria and Canada.” 

Woodmac research director Andrew Harwood said that in maintaining output from the Prelude facility, Crux will support Shell’s belief in LNG’s key role in the energy transition. Shell is also making substantial investments in its renewables and energy solutions business in Australia, as it seeks to diversify away from its legacy oil and gas business.

Edited by Creamer Media Reporter

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