Melbourne — Undaunted by hefty writedowns on its Australian gas assets, Royal Dutch Shell sees its liquefied natural gas business and “new energy” acquisitions Down Under as core to its long term plans, the Australian unit’s chairman said on Tuesday.
As Europe’s biggest oil company aims for net zero emissions from its operations by 2050 and plans a major restructuring, Shell still sees gas as a crucial part of the puzzle, with around a quarter of its gas assets in Australia.
In July, Shell booked $11 billion in writedowns on its gas business, mostly on its Australian Prelude floating LNG (liquefied natural gas) and QGC business, after cutting its long-term oil and gas price outlook.
QGC, which Shell acquired with its $54 billion takeover of BG Group in 2016, produces gas in the northeastern state of Queensland and runs the Queensland Curtis LNG plant, the biggest contributor to Shell’s 35.6 million tonnes of LNG output in 2019.
“We look at all of our assets in Australia as an important part of our portfolio. My job is to make sure that we continue to add value to those assets and we do that together with our partners,” Shell Australia Chair Tony Nunan said.
He declined to say how the Australian operations might be affected by Shell’s restructuring plan.
The company has been plagued by problems with the $17 billion Prelude FLNG project – the world’s biggest floating vessel and one of just two floating LNG projects in the world.
Prelude shipped its first cargo last year more than two years behind schedule, but has been shut for most of this year following electrical and other problems. Nunan declined to predict when Prelude might resume production.
“Because what I want is to make sure that we do this safely, we do it right, and we don’t just think about Prelude in the next three months, we think about Prelude in the next decades ahead,” Nunan said.
Shell has also been hit by problems at the Gorgon LNG plant off Western Australia, where it owns a 25% stake. Nunan said the company is working closely with Gorgon’s operator Chevron Corp on the staged shut down of the plant’s units to fix weld problems.
Shell sees QGC, Prelude, and its stakes in North West Shelf LNG, Gorgon LNG and the Browse project – Australia’s biggest undeveloped offshore gas resource – all meeting its customers’ long-term needs even as the world looks to cut carbon emissions.
Shell earlier this year committed to developing the first stage of a $7 billion coal seam gas project in Queensland with partner PetroChina, a rare investment in the industry amid the oil price crash in April.
At the same time, the company sees Australia as a test bed for the transition to cleaner energy, with its A$617 million acquisition last year of ERM Power, a stake in renewable power developer Esco Pacific, its development of a solar farm, and the recent acquisition of carbon farming company Select Carbon.
The company is looking to use Select Carbon’s knowledge from carbon sequestration in soil and apply it across its portfolio to create carbon offsets.
“Ultimately, where there are parts of the economy that are harder to decarbonise, for instance heavy transportation and some types of manufacturing…then offsets become important,” Nunan said.
(Reporting by Sonali Paul; Editing by Lincoln Feast)