I’ve got no issues with Woodside or Australia sending the giant capex plan for the Browse LNG development to Korea but you might just pause to wonder why Australia doesn’t bother competing for such a huge pile of cash. From UBS:
Woodside provided more clarity on its timeline and scale of its Browse development utilising Shell’s Floating LNG technology. Woodside, as operator of the JV and 31.3% equity participant, plans to obtain JV approval to commence Basis of Design work on FLNG ahead of entering FEED in mid 2014 and FID in mid 2015. We see from Woodside’s release of more
information on Browse, which has been conservative with its announcements to date, that most impediments to pursuing FLNG have now been addressed.
On sizing, Woodside points to the “design one, build many” approach from Shell, which is in the construction phase on Prelude (3.6 mtpa). We have therefore modelled each Browse FLNG vessel as a 3.6 mtpa output, however we believe that the JV would look at the option of increasing the output slightly based on lessons learnt from Prelude. We have also run a scenario with output of 4.0 mtpa each.
Woodside has signalled a 15 month gap between the commencement of construction of each vessel targeted for mid 2015 on up to 2 vessels. Woodside has outlined its proposed timeline for moving Browse FLNG to FID, with mid 2015 identified as the target date for project sanction.
How we model Browse FLNG – key assumptions
We have assumed that each FLNG vessel and subsea equipment (wellheads, wells, umbilicals etc) will cost approximately $13bn. Woodside mentioned on the conference call that the costs for subsea equipment and installation would be shared amongst each FLNG vessel. This is important as we had been assuming that the first FLNG would have to carry a disproportionate share of the capex for the subsea and subsurface capex, which would therefore impact the economics and investment decision on FLNG-1.
$39 billion over three years for LNG equipped ships built in Korea. For perspective, this one project represents about 60% of a year’s worth of housing investment, but of course, it keeps on giving.
With Prelude underway and BHP looking at multiple ships for Scarborough, Inpex looking at Abadi and many other projects around the world, FLNG ships are a boom in the making.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
