By ROSS KELLY
SYDNEY -- ExxonMobil laid out plans for a development using
the world's biggest floating natural gas
processing plant, in a technically challenging move that
underscores its bullish view on Asian demand for the fuel.
Exxon and partner BHP Billiton want to anchor a vessel
extending 495 meters -- the equivalent of around five football
pitches -- at sea to tap into the remote Scarborough natural
gas field offshore Western Australia. They're seeking
government approval for the multibillion dollar project, and targeting first
production as early as 2020.
Floating liquefied natural
gas technology, known as FLNG, is untried but has captured
the attention of some of the world's biggest energy companies
seeking to access gas fields that are too small or remote to
develop using pipelines and onshore facilities. Shell is a leading
proponent of FLNG
vessels, which it plans to deploy in Australia and possibly
The relative calm of the waters off Australia's northeastern
coastline make the country a strong candidate to accommodate
the world's first FLNG
vessels. Its stable political environment and proximity to
Asian markets that have a growing appetite for fuels that are
cleaner than coal when burnt are also drawcards.
According to the International Energy Agency, China's natural
gas demand alone will more than quadruple to 545 billion cubic
meters between 2011 and 2035.
However, companies like Exxon need to ensure their vessels
can withstand stormy seas. One main concern is that the forces
generated by liquefied gas sloshing in partially filled
containers can damage the storage system. That issue is being
addressed with containers designed to minimize sloshing and
with elaborate anchoring systems that limit the movement of
vessels in the water.
Exxon's proposed facility would produce between 6 million
and 7 million tpy of liquefied natural
gas, or LNG, for several decades. The Scarborough resource
was discovered in 1979 and is estimated to hold up to 10
trillion cubic feet of gas -- equal to more than a third of the
US's annual gas consumption.
Early design work would begin next year, ahead of a final
investment decision in 2014-15, Exxon said in a filing to the
federal government's environment department. A Melbourne-based
spokeswoman for Exxon wasn't available for comment Tuesday. A
BHP spokeswoman couldn't immediately comment.
With close to a dozen natural-gas export terminals planned
for its coastline, Australia is poised to leapfrog Qatar as the
world's top exporter of LNG by the end of the decade. LNG
is natural gas chilled to a liquid so that it can be shipped by
The industry, however, is facing increasing cost headwinds
driven by a strong local currency and a shortage of skilled
labor. Underscoring these challenges, Chevron and smaller joint
venture partners including Exxon and Shell said in December the
cost of building their giant Gorgon LNG project on the Western Australian
coast had blown out by a fifth to 52 billion Australian dollars
The budget overruns come as Australia becomes increasingly
likely to face rising competition from emerging gas-export
industries in North America and Africa, which could make it
tougher to secure customers.
FLNG is often touted by company executives as a means of
mitigating cost pressures because much of the construction process occurs offshore
in countries with cheaper sources of labor. Companies also
don't have to pay for acquiring and clearing land.
"For some of the more economically challenged gas resources
out there, floating LNG is going to take on a much higher
profile," said Andrew Williams, a Melbourne-based energy
analyst at RBC Capital Markets.
In 2011, Shell committed to use a FLNG
vessel to process natural
gas from its Prelude field in the Browse Basin offshore
northwestern Australia. The vessel is due to begin producing
3.6 million tpy of LNG
Shell estimated that its project would cost between $3
billion and $3.5 billion for every 1 million tons of production
capacity, or between $10.8 billion and $12.6 billion.
In its filing Tuesday, Exxon didn't estimate a cost for its
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