By ROSS KELLY
SYDNEY -- A senior Royal Dutch Shell executive said
Wednesday the cost of building energy projects in Australia is
becoming very worrisome as the European oil giant
prepares to decide whether it will spend billions more dollars
in the resource-rich nation.
Shell has already committed almost $30 billion to Australian
gas-export projects being built over the next five years. The
company's Australian head, Ann Pickard, said the figure is
poised to become $50 billion if final decisions are made on
other projects that Shell has on the drawing board.
So the costs have to stay competitive, Ms.
Pickard told a conference.
Australia is central to the growth plans of many big oil
companies including Shell and Chevron as they attempt to meet
intensifying demand for cleaner-burning fuels from
fuel-strapped Asian nations such as Japan and rapidly
industrializing countries such as China.
gas has overtaken oil to count for 51% of Shell's total
fossil fuel output.
Australias vast natural
gas reserves, political stability and proximity to Asia
make it an attractive place to invest.
Over $175 billion worth of gas-export projects under construction on its coastline stand
to catapult the country above Qatar as the world's biggest
gas, or LNG,
exporter by the end of the decade.
The industry here, though, faces challenges. A lack of
skilled labor combined with a surge in development activity
that's also occurring in the country's booming mining sector
has squeezed labor supplies and made Australia one of the most
expensive places in the world to produce LNG.
And a soaring Australian dollar is making locally-based
skills and equipment more expensive for foreign-based
Such cost pressures are building at a time when companies
mull whether to start exporting LNG to Asia from North America
and East Africa, potentially increasing competition for
Australian projects, particularly those not
currently under construction.
Shell hasn't yet made a final decision on whether to proceed
with a massive LNG venture in Queensland state with PetroChina
that will attempt to chill gas trapped in coal seams for
And although Shell just increased its shareholding in the
development in Western Australia state, an investment decision
on that project isn't expected until next year.
Im hoping we can get some more projects going
but the costs here are getting to be very worrisome, Ms.
Pickard told reporters.
Shell is hoping it can source workers more easily and more
cheaply by timing a final investment decision on its Queensland
LNG joint venture a few years after three rival developments
Still, Ms. Pickard said it is possible Shell could process
its gas through a rival LNG plant in Queensland rather than
build its own plant.
Thats certainly an option. But the intent of
PetroChina and Shell, of course, it to continue with our own
project, she said.
As for Browse, joint venture partners including Woodside
Petroleum are spending over $1 billion investigating the
commercial viability of piping the gas to a new LNG plant in
the environmentally-sensitive Kimberley region.
Shells decision this week to almost triple its stake
in the project by taking Chevron's 17.5% interest has fanned
speculating the resource could be processed on a floating LNG,
or FLNG, vessel instead.
A pioneer of FLNG
technology, Shell is targeting first
production from the world's first FLNG
vessel from its Prelude field, located near Browse, in
Well take the cost estimates and see if we've
got a commercial project in the Kimberley or not.
Then, obviously in consultation with the government, well
make a decision on whether we'll go forward in the Kimberley or
look at other alternatives.
Dow Jones Newswires