December 6, 2024

Woodside Petroleum Cancels Onshore L.N.G. Project in Australia

Global energy companies have invested $140 billion in six L.N.G. plants in just two and one-half years as Australia has increased production on its way to becoming the largest exporter of the gas in the world.

But investors’ interest in the sector in Australia has cooled recently because of huge costs overruns and in the face of rising competition from North America, where huge new supplies of gas have been tapped from shale.

Woodside’s canceled onshore project, called Browse, had been expected to export enormous amounts of liquified gas to Asia. The shelving of Browse as an onshore plant could spell an end to new onshore gas projects in Australia in favor of offshore plants that can be built at a lower cost and face fewer environmental and landowner hurdles.

“This decision will surprise few, as the proposed onshore development always looked too economically, technically, environmentally and socially risky for too little reward,” analysts at the bank Macquarie said in a research note.

Woodside also appears to be pivoting its focus toward North America, confirming Friday that it had lodged an expression of interest in developing a Canadian L.N.G. project.

Browse was to be Woodside’s biggest such onshore L.N.G. development yet, but it had been plagued by controversy over its proposed location at James Price Point on Australia’s northwest coast, coming under fire from environmentalists and some indigenous landowners.

The site is home to the world’s largest dinosaur footprints and sacred Aboriginal sites.

Peter Coleman, the chief executive of Woodside, said any new development would have to provide significant cost savings, adding: “Our customers are saying to us very clearly, ‘No longer can we pay for your expensive projects.”’

Many in the industry consider a floating L.N.G. plant to be the most likely fallback plan.

Analysts at JP Morgan have estimated that a floating project would mean a 20 percent saving in costs, resulting in a capital expenditure of $35.5 billion, versus $44.6 billion for the onshore development option.

Estimates of the cost of the onshore plant vary, but some analysts had said it could be as much as $48 billion.

Of seven L.N.G. plants under construction in Australia, all of which are due to come online in 2014 or later, four have already announced budget blowouts ranging from 15 percent to 40 percent.

Woodside owns a 31 percent stake in Browse, which it is developing with Royal Dutch Shell, BP, PetroChina, Mitsui and Mitsubishi.

Shares in Woodside, which has a market value of about $30 billion, rose 3 percent on expectations it would develop a less expensive option, but Chiyoda of Japan, which has a contract for the Browse project, tumbled 11 percent.

Building a floating plant in Asia and towing it into place off the coast of Western Australia would be likely to save billions of dollars in construction costs.

Earlier this month, Exxon Mobil and BHP Billiton disclosed plans to build the world’s largest floating L.N.G. vessel off northwestern Australia, producing six million to seven million tons of liquified gas per year, starting in 2020 or 2021.

Browse had been aiming for 12 million tons per year.

Shell, which owns 24 percent of Woodside, has not publicly supported a floating L.N.G. plant for Browse, but Ann Pickard, chairwoman of Shell Australia, has backed floating L.N.G. plants as a good solution for the problems with high costs in Australia.

Ms. Pickard has also championed the plants as a way for Australia to make revenues faster, though unions and politicians in Australia are worried about job losses from going offshore.

Another joint venture partner, PetroChina, said Friday that it was still deciding whether it would invest in Browse and that it was studying the project’s feasibility.

Prime Minister Julia Gillard said the decision had been a commercial one and was not the end of the nearly decade-long boom in resources in the country.

“We haven’t seen the peak of the investment phase into resources yet. And we are yet to see the peak of the production phase,” Mr. Gillard said in Sydney. “So we will be seeing the resources boom at work in our economy for a long time to come.”

Article source: http://www.nytimes.com/2013/04/13/business/global/woodside-petroleum-cancels-onshore-lng-project-in-australia.html?partner=rss&emc=rss

Shell Suspends Drilling for Arctic Ocean in 2013

The company announced it will “pause” exploration in the Chukchi Sea off Alaska’s northwest coast and in the Beaufort Sea off the state’s north coast to prepare equipment and vessels for drilling in the future.

“We’ve made progress in Alaska, but this is a long-term program that we are pursuing in a safe and measured way,” Shell Oil Co. President Marvin Odum said in the announcement. “Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people following the drilling season in 2012.”

Environmental groups opposed to drilling cheered the announcement.

“This is the first good decision we’ve seen from Shell,” said Mike LeVine, an Alaska spokesman for Oceana. “Given the disastrous 2012 season, our government agencies must take advantage of this opportunity to reassess the way decisions are made about our ocean resources and to reconsider the commitment to explore for oil in the Arctic Ocean.”

Shell completed top-hole drilling on two wells in 2012 in the Beaufort and Chukchi seas, but the first drilling in more than two decades was plagued by problems before and after the short summer open-water season.

The company’s spill response plan required a spill response barge to be on site before drill bits dug into petroleum-bearing zones. That never happened. A key piece of equipment, a containment dome, was damaged in testing off the Washington coast.

Seasonal ice in the Chukchi Sea delayed Shell vessels from moving north. When Chukchi drilling began Sept. 9, a major ice floe forced Shell’s drill ship off a prospect less than 24 hours later.

When the drilling season ended, the Coast Guard announced that it had found 16 safety violations when the Noble Discoverer, which drilled in the Chukchi, was in dock in Seward, Alaska. The Coast Guard said last week that it has turned its investigation of the vessel over to the U.S. Department of Justice.

The problems crested in late December when the Kulluk, a round Shell drilling barge designed for use in sea ice, broke away from its towing vessel on its way to a Pacific Northwest shipyard in Washington state.

The Kulluk ran aground off a remote Alaska Island near Kodiak Island. It was pulled off six days later but requires repairs. The Kulluk left under tow Tuesday for the Aleutians Island port of Dutch Harbor, where it will be loaded onto another vessel for transport to a shipyard in Asia. The Noble Discoverer also will undergo maintenance and repairs in Asia.

Interior Secretary Ken Salazar has announced that his department would perform an “expedited, high-level assessment” of the summer drilling season. Salazar said the review would pay special attention to challenges that Shell encountered with the Kulluk, with the Noble Discoverer and with the company’s oil spill response barge. The Interior Department oversees offshore drilling permits, and Salazar said drilling in frontier areas such as the Arctic demand a higher level of scrutiny.

The Coast Guard also is reviewing the grounding of the drill vessel. Rear Adm. Thomas Ostebo said the investigation will look at every aspect of the incident, from possible failure of materials to evidence of misconduct, inattention or negligence.

Shell has said the grounding was a maritime transport problem. Drilling in 2012, Odum said Wednesday, was completed safely.

“Shell remains committed to building an Arctic exploration program that provides confidence to stakeholders and regulators, and meets the high standards the company applies to its operations around the world,” Odum said. “We continue to believe that a measured and responsible pace, especially in the exploration phase, fits best in this remote area.”

Shell Alaska spokesman Curtis Smith said drilling could resume in 2014.

“It’s possible, depending on the result of ongoing reviews and the readiness or our rigs, and frankly the confidence that lessons learned from our 2012 drilling program have been fully incorporated.

Damage to the Kulluk will be fully assessed at the shipyard.

“Even before we get a closer look at these vessels, we’ve made an internal decision to pause,” Smith said. “The overriding factor is our commitment to a drilling program that meets Shell’s high standards for safety and operational excellence.”

Article source: http://www.nytimes.com/aponline/2013/02/27/us/ap-us-shell-arctic-offshore-drilling.html?partner=rss&emc=rss