The continuing downward pressure on oil prices has led Royal Dutch Shell PLC to scrap a $4.6-billion contract with South Korean shipbuilder Samsung Heavy Industries Co. Ltd. for three floating LNG (FLNG) units that were earmarked for Australian projects.
The deal was originally signed in June last year, with each of the three FLNG platforms to have a production capacity of 3.9 million tons per year and 17,000 to 22,000 b/d of condensate.
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Shell's move to cancel this contract follows a March decision by Australian Woodside Petroleum to halt the development of the $40-billion Browse gas project off Western Australia's Kimberley coast. The contract in question was for FLNG vessels to service this particular project, so Shell's decision was expected.
The FLNG units were destined for the Brecknock, Torosa, and Calliance gas fields. Together, these three fields are believed to hold gross contingent resources of 15.4 tcf of dry gas and 453 million bbl of gas condensate.
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Woodside has 30.6 percent participating interest in the Browse project. Shell Australia has 27 percent, while BP Developments Australia has 17.33 percent, Japan Australia LNG 14.40 percent and PetroChina International Investment 10.67 percent.
Though development of Browne has been suspended, Woodside is still holding out for a final investment decision, which is expected to come during the second half of this year. The front-end engineering and design work has already been completed on this project.
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Samsung, for its part, has noted in a regulatory filing that the contract from Shell was voided due to the existing tough market conditions, i.e. low oil prices.
Instead, the focus will be shifted to the Prelude FLNG vessel, which is slated for completion sometime this year.
By James Burgess of Oilprice.com
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