Shell has given its clearest sign yet it will defy Premier Colin Barnett by refusing to process gas from the Browse field at James Price Point, with the oil giant’s international boss openly admitting he is going slow on the final decision in favour of fasttracking a floating LNG processing facility.
Releasing the global petroleum giant’s financial results overnight on Thursday, Shell chief executive Peter Voser told investors that exploding costs in WA would force the company to go slow on land-based developments and concentrate on its $US12.6 billion ($12.15 billion) floating venture, named Prelude.
“Chevron recently announced the cost overrun at Gorgon in the overheated Australian market,” Mr Voser said.
“None of the partners like to see that, and this starts to impact our thinking on the pace of new financial investment decisions in Australia, and we have slowed down there, concentrating really on Prelude.”
The Barnett Government has championed land-based processing facilities because they give local politicians and bureaucrats much more clout when they negotiate with companies tapping offshore gas, particularly from fields in Commonwealth waters.
The James Price Point option would see oil giants pay compensation worth $1.3 billion to local Aboriginals.
Supporters say the onshore option would give the State Government the ability to foster industry in the Kimberley and would allow the development of other gas fields off the far North West.
While it is generally known that Shell, which is a major partner in the Browse field with Woodside, opposes processing the gas on land because of price fears, the company has so far downplayed its position, making Mr Voser’s comments a significant slap in the face to the WA Government.
Mr Voser said its floating LNG venture in Abadi in Indonesia was likely to be its next project in the Asia Pacific and its gas resources off Exmouth, including Browse — which it shares with partners including Woodside — could “become floating LNG”.
JPMorgan has calculated that James Price Point will cost $50.6 billion, compared with $41.2 billion for floating LNG.
The declaration by Shell is likely to infuriate Mr Barnett, who declined to comment yesterday but has in recent weeks issued a veiled threat that he would be prepared to ask the Federal Government to strip the partners of their rights to the gas if they do not process it onshore.
The apparent hardening of Shell’s resolve potentially creates a strategic headache for Woodside boss Peter Coleman, who has to report to Government about his intentions by the middle of this year under retention lease obligations.
The Browse development has dominated headlines for months and the issue flared last week when West Business in The West Australian newspaper reported that the head of the State’s environment watchdog, Paul Vogel, doubted WA’s ability to intervene to stop any move to develop the project offshore, saying that if the project was in Commonwealth waters it would be a matter for the Federal Government only.
Mr Barnett insists the State has the power to force petroleum giants to process the gas onshore, but has so far refused to clarify what those powers are besides a veiled threat to strip the joint venture partners of their retention leases when they expire in the middle of this year.Woodside has consistently refused to buy into the debate.