Shell has provided an early test – perhaps headache is more the word – for the new ALP federal government, along with the expanded greens and independents who want faster climate change policy decisions.
The Crux gas field is around 190 kilometres off the Kimberley coast of Western Australia and 620 kilometres north-east of Broome.
The energy giant yesterday green lit the $US2.5 billion Crux gas project. Shell owns 82% of the project.
Construction is expected to start in 2023 with first gas expected in 2027, which will feed the 3.6 million tonne a year Prelude floating liquefied natural gas (FLNG) facility.
The project will be the first of a couple of similar developments in the next decade or so to provide what Shell called ‘backfill’ gas for the Prelude facility in the East Browse Basin to maximise the production targets of the fields in the area.
Shell said the project would help its Asian customers move from coal to gas, and also provide a secure supply source, a key factor following the imposition of sanctions on Russia.
“The project will also boost our customers’ security of supply, which is becoming an ever more significant consideration for global consumers,” said Wael Sawan, Shell’s director of integrated gas, renewables and energy solutions said in a statement.
“The use of Prelude’s existing infrastructure enables significantly reduced development costs, making Crux competitive and commercially attractive,” Sawan said.
Energy consultants Wood Mackenzie estimated it would cost about $2.5 billion, while Credit Suisse analyst Saul Kavonic estimated it at between $2 billion and $3 billion.
“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,” Wood Mackenzie analyst Michael Song said in a note, reported by Reuters.
However, he said the Crux volumes would enter the market at the same time as around 100 million tonnes a year of new LNG would be coming to the market from Qatar, the United States, Nigeria and Canada.
The project decision will be watched closely to see if the newly-resurgent Greens with the policy of opposing new coal and gas projects object. There’s also the so-called “teal” independents, many of whom share similar views.
The Greens want new gas, coal and oil projects frozen, but seeing Crux has been discussed for several years, it should qualify as a pre-existing project.
Moreover, the new ALP government can be expected to support the project after it agreed 18 months ago to support new projects.