FLNG better than nothing?

ScreenHunter_02 Jul. 08 09.06

By Leith van Onselen

The Australian today has published an interesting article on the row developing over future LNG investment in Western Australia:

FEDERAL Resources Minister Gary Gray and West Australian Premier Colin Barnett are at loggerheads over the federal government’s strong push for the rapid development of Woodside Petroleum’s multi-billion-dollar Browse liquefied natural gas project.

Mr Barnett has emerged as the biggest stumbling block to the project going ahead because he is strongly opposed to the use of floating LNG technology to process the gas reserves off the WA coast, warning it will create fewer jobs than a land-based project.

Sources have told The Australian that Mr Gray and Woodside are both urging Mr Barnett to immediately remove the existing Browse lease conditions that stipulate the project must be built onshore at James Price Point…

The Perth-based oil and gas company is now believed to favour floating LNG, which will be far cheaper. Analysts say any new onshore LNG plants are unlikely in Australia in coming years due to the high costs of construction. Mr Gray, a former senior executive at Woodside, has supported the use of FLNG, warning that gas reserves were at risk of being left undeveloped, costing billions of dollars in lost royalty revenue and thousands of jobs…

[Premier Colin Barnett] warned that pursuing a floating facility would deprive the state and nation of jobs and domestic gas supplies.

As noted by Houses and Holes previously, the proposed floating LNG project is a neat symbol for the contemporary mining boom. The floating LNG facility sails in from Korea (where it is built), extracts the gas, ships it out again (often to Korea), never once seeing landfall in Australia: a giant, mobile, extractive machine neither Australian owned nor operated. 

In the case of the proposed Browse project, floating LNG would see some 6,000 less jobs created than if the project was developed onshore. Hence, Premier Colin Barnett’s disapproval.

At the same time, however, the Federal Government is keen to get the floating LNG project up and running, since it offers tax receipts via the petroleum resources rent tax in addition to some corporate taxes. Given that onshore development is unviable, it’s a case of floating LNG being better than nothing for the Federal Government.

The Floating LNG debate is also similar to the broader employment shift underway as Australia’s resources boom shifts from the investment phase to the operational/extraction phase. The investment phase is especially employment intensive, whereas the operational/extraction phase is not. As current mining projects are completed, Australia faces an employment hole as a large number of construction workers, engineers, mining services, and other ancillary workers are no longer required. While some of these workers are on 457 visas, and will return home, many are local and will be added to the un/underemployment queue.

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Leith van Onselen
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  1. I hope they leave the gas in the ground until it s economical to build onshore, it would be a nonsense to waste this non-renewal resource with a FLNG project.

    • Firstly, there are reasons why FLNG is cheaper than an onshore facility. It comes down to the labour and environmental regulations that artificially raise costs.

      Secondly, even if FLNG is now the cheapest option there’s more value extracting and processing it than leaving it in the ground. Lower energy prices will always benefit everyone.

      • you do realize than when you said cheaper it means bring less value to australia ?

        it this case it bring no value what so ever since the taxes are low and 0% of the gas would find its way into the Australian energy market.

        totally foolish not to leave it in the ground for our future needs.

      • “it this case it bring no value what so ever since the taxes are low and 0% of the gas would find its way into the Australian energy market.”

        The value Australia gets from the project is not determined by how much tax revenue generated or how much gas will be used domestically.

        Ultimately cheaper energy prices worldwide will result in cheaper products for Australians to consume.

        The real question is why FLNG is being considered instead of onshore development. The article mentions high construction costs. Solve this and everyone wins.

  2. What really bugs me about “Carbon Tax” is that the best thing Australia can possibly do for the global ecosystem is to simply leave the stuff in the ground.

    Reduced mine exports achieves far more than any tax / carbon trading scam could ever possibly achieve, of course it wont happen because Aussies are addicted to spending that which they did not earn by their own sweat or know how. The un-sustainability of the Aussie economic model seems completely lost on the average Green leaning Aussie.

    Personally I find the self righteousness of green leaning Aussies just mind blowing. They’ll gladly lecture me on how globally polluting China is and in the same sentence claim they are super Green because they installed Solar cells on their roof.

    • Totally agree. The disingenuous nature of the carbon tax and energy costs are mind-blowing.

      Lets make energy for Australia as cheap as we can – and if we want to reduce carbon emissions then just leave more in the ground and don’t export it.

      The carbon tax is just that – another tax.

  3. Don’t forget the unions are also opposed to FLNG due reduced employment prospects. Extraordinarily the unions also affiliated themselves with the anti-James Price Point mob. It would appear the unions are confused on the issue.

    Cost differentials land based LNG v FLNG have been put at circa 20% however potential for cost blowouts similar to Gorgon probably realistically indicate higher differential.

    Despite public utterances understating the role the Green opposition to the project had in influencing FLNG decision it was a component in going offshore.

    I wish Barnett well but FLNG circumvents many of the land based hurdles.