Several of the seven LNG export projects under construction in Australia have reported reaching significant milestones in recent weeks, with the front–runners now less than a year away from start-up. Together these seven projects will boost Australia’s LNG production capacity to around 87 mtpa – giving Australia a bigger production capacity than Qatar before the turn of the decade.
The announcements underline that while most of the projects have conceded that they face large cost over-runs, for the most part they have done better in terms of schedule than many expected they would.
World first’s CSG-to-LNG plant: The BG group-led Queensland Curtis LNG (QCLNG) project – expected to be the first of the seven to begin operations, – said towards the end of June that it had started up a major processing network for coal-bed methane (CBM), or coal-seam gas (CSG) as the Australians call it. When it comes on stream, probably later this year, after some delay, it will be the world’s first natural gas liquefaction plant to be supplied by CSG.
The project consists of two 4.25 mpta trains, the first of which is 50:50 owned by BG and China’s CNOOC and the second 97.5%-owned by BG and 2.5% by Tokyo Gas. The project was initially estimated to cost US$15 billion but in May 2012 BG said estimated cost had risen to US$20.4 billion. Date of first gas was given as 2014, which still holds today, though start-up was initially due early in the year rather than towards the end.
Monster project: Gorgon LNG, the Chevron-led project being constructed on Barrow Island offshore north-western Australia, reported at the end of June the arrival of the final module for its first train. The module is the largest of the 21 that will make up the train, weighing 6,300 tonnes and measuring 55 metres by 46 metres by 45 metres.
The final module, the largest of the 21 that make up the train, for the first train has just arrived at Barrow Island. (Source: Chevron)
Chevron Australia managing director Roy Krzywosinski said: "The arrival of the final train 1 module marks a key milestone in the development of the largest single resource development in Australia's history." The three-train 15.6 mtpa project also happens to be one of the most expensive. The project was initially expected to cost A$43 billion but as of December last year that estimate had risen to A$55 billion.
As of the end of April, Gorgon LNG was reported to be 80% complete. (Source: Chevron)
The project is also significantly behind schedule. Initially expected to start up this year, date of first gas has shifted to mid-2015 and some observers regard that as optimistic, seeing 2016 as more realistic.
Commenting on the schedule earlier this year at Chevron’s first-quarter financial results announcement, CFO Pat Yarrington said: “The final two gas turbine generators have been installed and additional progress has been made on the LNG tank, jetty and other related infrastructure on the island. All major 2014 milestones are on track, and we expect plant start-up and first gas in mid-2015.” He added that as of the end of April the project was 80% complete
Three milestones for APLNG: Another CSG-to-LNG project, Australia Pacific LNG (APLNG), said in early July that it had reached three “key milestones”. Hydro-testing of LNG tanks on Curtis Island has begun, construction of the main gas transmission pipeline has been completed, and gas from the recently commissioned Condabri Central gas processing facility is being delivered into the gas network.
APLNG CEO Page Maxson said: “These three milestones mark very definitive steps in the progress we are making in the gas fields, on the pipeline and at the LNG facility on Curtis Island . . . Testing the integrity, quality and stability of the LNG storage tanks is a crucial part of ensuring they are ready to receive the first LNG, and we are pleased that our tank construction has reached this point.”
Following construction and commissioning in June, gas from Condabri Central Train 1 is now being delivered into the domestic gas network together with gas from APLNG’s existing Spring Gully and Talinga facilities. Condabri Central is the first of seven new gas processing facilities being constructed.
The project expects to start up in the middle of next year, which was the target year announced when the project was sanctioned. However, there has been a large cost over-run. The initial estimate of US$20 million has risen to A$27.4 billion.
Past half-way point: The INPEX-led Ichthys LNG project recently celebrated reaching the half-way point in construction. No cost-over-runs have so far been announced for the two-train 8.4 mtpa project and last year INPEX confirmed that first gas is still due in 2016.
Of the remaining projects, the Santos-led 7.8 mtpa GLNG project, the third CSG-to-LNG plant, still expects to start up in 2016, though as of early 2014 estimated cost had risen from US$16 billion to US$18.5 billion. The Chevron-led 8.9 mtpa Wheatstone project is also expected to start up in 2016.
The final project of the seven is Shell’s ground-breaking Prelude floating LNG (FLNG) facility. The project is still expected to come on stream in around 2017, producing 3.6 mtpa of LNG and further volumes of upstream liquids. Cost has not been disclosed, but is believed to be around US$12.5 billion. There are rumours of large cost over-runs but Shell has nether confirmed nor denied them.
It remains to be seen whether all the projects will stick to their current schedules, but if they do Australia could become a bigger LNG producer than Qatar much earlier than anyone would have believed possible, even as recently as a couple of years ago.
It is important however to distinguish clearly between LNG capacity and LNG output. Qatar’s LNG trains have been performing very impressively in recent years in terms of utilisation. Some of the Australian projects could face gas supply issues, especially the CSG ones, given that they will be the world’s first.
By Alex Forbes
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