30 May 2022 | 07:33 UTC

Shell sanctions Crux project to boost gas supply to Australia's Prelude LNG

Highlights

First gas from Crux field project expected in 2027

To supply Prelude FLNG with up to 550 MMscf/day

Shell Australia Pty Ltd and its joint venture partner, SGH Energy, have sanctioned the development of the Crux natural gas field, off the coast of Western Australia, to boost gas supply to Australia Prelude LNG, Shell said in a statement on May 30.

The Crux field lies in the Commonwealth marine waters in the northern Browse Basin, 620 km north-east of Broome. The field will be connected to Shell's Prelude PLNG platform located 160 km away via an export pipeline.

"The use of Prelude's existing infrastructure enables significantly reduced development costs, making Crux competitive and commercially attractive," said Shell Australia Chair Tony Nunan.

Shell's Prelude is the biggest offshore LNG production project in the world, with a capacity of 3.6 million mt/year. The facility has recently resumed production of LNG cargoes, a company spokesperson said in a statement April 11, after the facility was offline for more than four months due to a power outage caused by a fire in early December.

Construction of the Crux project is expected to begin in 2022, with first gas expected in 2027. The Crux project will have the capacity to supply the Prelude FLNG facility with up to 550 MMscf/day.

"The project will also boost our customers' security of supply, which is becoming an ever more significant consideration for global consumers," said Wael Sawan, integrated gas, renewables and energy solutions director at Shell. "Natural gas from Crux will play a key role in helping Asian customers move from coal to gas as a cleaner-burning fuel."

Diversifying LNG supplies

Shell decision to go ahead with the Crux project is likely due to the increasingly uncertain geopolitical stability arising from Russian-Ukraine conflict and the recognition of need to secure diversified and secured supply of resources.

Europe's scramble to diversify away from Russian natural gas and an increased desire by buyers globally for security of supply amid the ensuing price volatility is likely to see more long-term LNG contracts concluded and final investment decisions taken on projects over the coming months, according to Michael Stoppard, global gas strategy lead at S&P Global Commodity Insights.

"There is some concern that Asia will face additional competition for LNG from Europe and particularly for supply outside the US," Stoppard said May 27 in an interview on the sidelines of the World Gas Conference 2022 in Daegu, South Korea.

"We expect for the next few years at least, the monthly and quarterly averages for prices to remain north of $20/MMBtu," Stoppard added.

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