Shell gives green light to new billion-dollar WA gas field
Shell has given the go-ahead to the development of the Crux gas field in remote waters off WA, insisting the new project has a role to play in the globe’s transition to cleaner energy.
The field, 620km north-east of Broome, will feed Shell’s giant Prelude floating LNG gas plant, 160km to the south-west.
Shell owns 82 per cent of Crux in partnership with Seven Group Holdings, the major shareholder in Seven West Media, owner of thewest.com.au. Seven had been exploring a sale of its stake.
While Shell did not disclose the development bill, Credit Suisse has put construction costs at between $US2 billion ($2.7b) and $US3b. Consultancy Wood Mackenzie estimated $US2.5b.
The green light comes at a sensitive time, with last week’s election results emboldening climate critics who argue that new fossil fuel projects should not be approved if the globe is to have a chance of limiting climate warming.
However, Shell reinforced the industry line that LNG from Prelude is enabling Asian customers to reduce their use of coal and is important in providing energy security at a time when markets have been disrupted by sanctions imposed on Russian oil and gas in the wake of the invasion of Ukraine.
“This project forms an important part of Shell’s integrated gas portfolio,” Wael Sawan, Shell’s director of integrated gas, renewables and energy solutions, said.
“Natural gas from Crux will play a key role in helping Asian customers move from coal to gas as a cleaner-burning fuel,” he said.
The project would “help us to meet the increasing demand for LNG as the energy market transitions to a lower carbon future” and “boost our customers’ security of supply, which is becoming an ever more significant consideration for global consumers”.
Shell’s Australian chief, Tony Nunan, said the use of Prelude’s existing infrastructure would significantly reduce development costs, “making Crux competitive and commercially attractive”.
Crux will be developed via five wells, a pipeline to Prelude and a remotely-operated platform.
Construction is expected to start next year, with first gas due in 2027. It will provide up to 550 million standard cubic feet of gas a day.
Wood Mackenzie research analyst Michael Song said Crux “has been a case of when rather than if”, as its gas was needed to ensure Prelude produced at nameplate capacity into the 2030s.
“With future supply secured, Prelude partners must ensure there are no further technical issues onboard the vessel and maintain stable production to take advantage of current LNG prices,” Mr Song said.
“In a global context, Crux is an example of the type of incremental, shorter-cycle, high-return development that the industry is targeting as it maintains capital discipline despite strengthening commodity prices.”