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Shell chief warns of cost pressures on LNG projects
Shell chief warns of cost pressures on LNG projects

Royal Dutch Shell Australia boss Ann Pickard has underscored the threat rising costs pose to the State's LNG developments, warning that the local industry was likely the world's most expensive.

Ms Pickard also confirmed that construction had begun in Korea and Dubai of its huge Prelude floating LNG vessel, which will be used to develop the namesake Browse Basin gas fields as early as 2016.

Shell has sold about a third of the Prelude project to companies including Japan's Inpex but Ms Pickard said yesterday it was unlikely to further reduce its stake.

Her comments, on the sidelines of a conference in Perth, will be scrutinised given Shell has a hand in a range of local LNG projects either in construction or under consideration that are battling soaring labour and building costs.

These include a 25 per cent stake in Chevron's $43 billion Gorgon venture and Woodside's controversial $40 billion Browse LNG development and the Chinese-backed Arrow project in Queensland. The latter two are yet to win approval.

"If we can't keep the prices down and we can't find a way to improve the productivity, onshore LNG plans will become increasingly difficult to build," Ms Pickard said.

She added that a rising Australian dollar was only one part of broader pressures in Australia that were "probably the highest cost base now" anywhere in the world.

She gave a glimpse of reported tension between the Browse partners about whether to develop the gas at the greenfields James Price Point site, or by piping the gas south to existing facilities at Karratha. "Woodside is fulfilling its (retention) lease obligations and we are very supportive of Woodside fulfilling its lease obligations," Ms Pickard said.

Her specific reference only to the lease obligations is in line with the views of analysts who speculate James Price Point will not go ahead when an investment decision is made by June, with the parties going through the motions to satisfy government lease requirements.

Ms Pickard distanced herself from Federal Opposition Leader Tony Abbott's comments, who warned that a coalition government would take a dim view of Chinese state-owned control of Australian companies and resources. She said its Arrow partnership with PetroChina was working well.

Woodside Petroleum chief executive Peter Coleman also warned about the competitive threat from East Africa