Offshore state of play

The first steel for the Prelude hull being cut out in Geoje, South Korea.

The first steel for the Prelude hull being cut out in Geoje, South Korea.

Australia’s offshore gas and pipelines sector is undergoing significant change with the imminent arrival of floating LNG to the market. Gas Today looks at the latest developments for Australia’s offshore sector.

In tough times spurred on by low oil prices and high demand, capital expenditure programs are also being tightened and development is slowing to record numbers. Professor Eric May is the Chevron chair in gas process engineering at University of Western Australia’s Centre for Energy.

He admits that while activity in the offshore sector is certainly not as high as it once was, it is an exciting time as it enters such as transition.

“In some ways, I would say there is no question that it has reached a bit of a plateau,” he says. “But obviously Browse and Prelude are world first and extremely exciting to watch. So too are the Gorgon and Wheatstone projects.”

OFFSHORE EXPLORATION ON THE UP
The Bureau of Resources and Energy Economics’ latest Resources and Energy Major Projects report, published in April, 2015, states that the overall number of uncommitted projects (at both the Feasibility and Publicly Announced stages) is decreasing and is now back to pre-investment boom levels.

Overall Australia’s total exploration expenditure, including both minerals and petroleum exploration, decreased 6.7 per cent in 2014, compared to 2013, to $6.6 billion.

But despite the currently gloomy outlook for energy investments, LNG, gas and oil continue to be experience positive gains.

Onshore and offshore petroleum exploration increased 7 per cent to $1.4 billion in 2014 and offshore exploration increased 3.7 per cent to $3.3 billion.

Offshore exploration accounted for nearly half of Australia’s total exploration expenditure in 2014.

While there is speculation that the recent downturn in petroleum prices will encourage lower exploration in the short term and sustain lower investment in new projects, in terms of total value, LNG, oil and gas projects
are still the biggest areas of spending.

There are seven LNG, gas and oil projects at the Publicly Announced Stage, according to BREE, with a combined value of over $67 billion. This high value is underpinned by offshore gas projects including Woodside’s Browse floating LNG, Shell Australia’s Crux LNG (Prelude) and Thai firm, PTTEP’s Cash Maple Development projects, each estimated at over $5 billion.

Professor May says while there is a notable slowdown in traditionally understood “greenfield” offshore projects, new projects are actually being undertaken simply by tying back to existing fields and facilities.

“When they evaluate ‘greenfield’ now, they (companies) will evaluate the cheapest method and existing facilities that can be tied back to.”

“In actual fact, I think one of the reasons for this change in activity is simple, the companies realised you only need a few LNG plants to deal with all the gas. And in FLNG you only need the one facility.”

But while the current market pressures may be hampering investment in exploration and production, Professor May says Australia could have even more valuable assets to export: talent.

“By now we have established Australia as a source of expertise in offshore exploration and with developments still in other parts of the world, that expertise will be needed,” he says.

“The expertise will be a major export and arguably more important. With FLNG being launched here in Australia, expertise will become more and more important the deeper and deeper we go.”

Gas Today has reviewed the current stat eof play in Australia’s offshore sector and the next generation for the country’s gas developments.

WOODSIDE - PERSEPHONE DEVELOPMENT
Status: In Development

Approved in November 2014, Woodside’s offshore Persephone project in the Carnarvon Basin along the North West Shelf (NWS) is progressing.

When completed, the project will be the third major gas facility in the NWS with an estimated total investment of $1.2 billion and first gas in 2018.

The Persephone Project joint-venture is made up of Woodside Energy (operator with a 16.67 per cent share); BHP Billiton Petroleum (16.67 per cent); BP Developments Australia (16.67 per cent); Chevron Australia (16.67 per cent); Japan Australia LNG (16.67 per cent); and Shell Development Australia (16.67 per cent).

The project consists of a 6.5 km subsea tie-back of two wells from the Persephone field – located 135 km northwest of Karratha, Western Australia in a water depth 126 m – back to the North Rankin Complex via a 12-inch flow-line.

In March 2015, engineering firm Subsea7 was awarded the contract forsubsea installation, diving and Work Pack 2 fabrication. Subsea7 will undertake fabrication, transportation, installation and pre-commission activities with the firm’s Seven Eagle vessel taking care of all the offshore activities.

Subsea7’s project management and engineering begun immediately after the March announcement with offshore
activities scheduled for later this year.

In August, Woodside announced the commencement of Persephone fabrication
activities and offshore brownfield work andconfirmed the 2018 start-up date.

The company initially aimed for drilling works to commence on the two production well’s topholes in Q4 2015 and reservoir drilling in Q2 2016. A 500 m radius exclusion zone will be in place around the rig for the duration of the drilling program.

CARNARVON PETROLEUM - CERBERUS PROJECT
Status: Seeking partners to advance project to drilling

Secured in May 2014, Carnarvon Petroleum’s wholly owned offshore Cerberus project covers about 3200 sq km in the Carnarvon Basin in Western Australia.

Since then, the firm says nominal work will be undertaken over the following three years.

The latest news from the project states that since permit award, Carnarvon’s geoscience team has significantly de-risked the area The company has so far licensed and
interpreted its 3D Monodon mega-merge survey and undertaken a detailed analysis of 16 Early Triassic and Upper Permian wells that had previously drilled in around the Cerberus blocks to improve its data accuracy.

The company also has undertaken a petro-physical analysis of some 30 wells in the Carnarvon Basin to further enhance its positioning for Cerberus.

Now, with all technical work complete, the firm confirmed in late July it is seeking partners to advance to drilling stage.

“The blocks offer low cost drilling in shallow water with shallow depth reservoir targets, providing Carnarvon with significant value for a modest investment,” the company stated in a recent ASX release.

The two primary drilling targets, Honeybadger and Belfon, lie in 25 - 30 m deep water, around 100 km from the major port of Dampier. The company estimates drilling costs to reach $10 million per well.

Carnarvon has until May 2017 to commit to drilling these wells.

INPEX - ICHTHYS PROJECT
Status: Under construction

The Ichthys 889 km gas export pipeline (GEP) will be one of the largest pieces of subsea infrastructure ever built when completed later this year.

The 42-inch pipeline, composed of some 700,000 t of steel and 550,000 t of concrete, will deliver gas and some condensate from the central processing facility in the Browse Basin to onshore facilities at Blaydin Point near Darwin.

The project’s joint venture partners include INPEX (63.445 per cent), Total (30 per cent), Tokyo Gas (1.575 per cent), Osaka Gas (1.2 per cent), Chubu Electric (0.735 per cent), Toho Gas (0.42 per cent) and CPC (2.625 per cent).

Oil and gas contracting service provider Saipem is the engineering, procurement, construction and installation (EPCI) contractor for the GEP.

Saipem’s semisubmersible pipelay barge, SEMAC-1, is installing the 164 km shallow water section of pipe. This work included laying the first 18 km section of the GEP through Darwin Harbour in mid-2014.

Saipem’s deep water installation vessel, Castorone, will lay the remaining 718 km of pipe to the Ichthys Field.

In August, 2015, the company announced the GEP was on track for first LNG by the end of 2015. Meanwhile, non-destructive testing and inspection firm Applus+ has been awarded a trio of contracts worth some $22.5 million.

A joint venture between AusGroup and Meisei Industrial has also been awarded a $A197 million subcontract for industrial work at the GEP.

On 12 August INPEX announced it had successfully landed three more 435-tonne subsea production manifolds on the seabed, bringing the total up to four. The installation took the company some two days to complete.

GDF SUEZ - BONAPARTE LNG PROJECT
Status: On hold

On 19 June GDF Suez – now known as Engie – confirmed the Bonaparte LNG project would no longer be exploring FLNG technology with its joint venture partner Santos.

Instead the company said it would develop the Petrel, Tern and Frigate natural gas fields located 250 km offshore of Darwin via a pipeline connection.

However, development of the Bonaparte LNG Project is still under consideration. The joint venture is made up of partners GDF Suez (60 per cent) and Santos (40 per cent).

“While the partners firmly believe the fields have material value, having been fully appraised, their future development using floating LNG technology, although technically robust as demonstrated during extensive pre FEED studies, does not currently meet companies’ commercial requirements,” the statement said.

News wire service, Reuters, reported that the joint venture’s decision to scrap the FLNG development came amid worries over the already $180 billion worth of similar rival projects in Australia.

“There were no technical showstoppers. There were no safety concerns with the technology,” Santos vice president John Anderson told Reuters.

“The decision here is really that the rate of return was not high enough to cover off a major project with complexity and a high level of capital exposure.”

According to the Reuters report, GDF Suez and Santos may consider building a pipeline, which could feed into the Ichthys project or ConocoPhillips’ Darwin LNG
plant. The pair may also use Italian group ENI SpA’s Blacktip infrastructure in the Bonaparte Basin.

The Bonaparte LNG project was under study for three years and aimed to produce 2.4 million t a year for sale into Asia-Pacific markets from 2019.

SHELL AUSTRALIA - PRELUDE FLNG PROJECT
Status: Under construction

The world’s first floating LNG (FLNG) facility is nearing completion. And it couldn’t come soon enough.

Since the vessel was first floated in 2013, the oil and gas and the wider minerals exploration community has been in awe of the sheer size of the Shell Australia project, which when complete will measure almost 0.5 km long and weigh more than six aircraft carriers combined.

Shell is planning to develop the Prelude, Concerto and Crux gas fields, located in permits WA-44L and AC/L9 in Western Australia’s offshore Browse Basin, using the FLNG technology.

It is anticipated that Prelude will stay moored in the Browse Basin, approximately 475 km north-northeast of Broome and over 200 km from the nearest point on the coast of the remote Kimberley region in Western
Australia, for 25 years.

The facility includes six LNG storage tanks with a total capacity of 220,000 cubic meters. Upstream facilities will include seven wells, four flowlines approximately 3km in length, umbilicals and flexible risers.

Prelude’s much anticipated launch is expected in 2016 and the company hopes To produce at least 3.6 MMt/a of LNG, 0.4 MMt/a of LPG and 1.3 MMt/a of gas condensate during its mooring.

The project be supported by onshore drilling, aviation and marine facilities based out of Broome.

In February, Australia’s regulatory body for offshore operations, the National Offshore Petroleum Safety and Environmental Management Authority gave Prelude’s subsea installation environment plan the green light.

Shell also announced earlier this year that about 40 per cent of the necessary contracts for the project and operations are expected to be filled this year.

Shell later confirmed that Prelude’s startup team had commenced site acceptance testing for phase 1 of the control and safeguarding system, which involved loop checking the 23,000 instruments on the facility to prove they had been correctly installed and configured.

In August the company confirmed the last of the project’s topsides modules had been safely installed by Drydocks World.

The turret, measuring almost 100 m high, with a 26 m diameter and weighing over 11,000 t, is designed to ensure the facility can operate safely in extreme weather conditions.

Joint venture participants in the project include Shell (operator, 67.5 per cent), INPEX (17.5 per cent), KOGAS (10 per cent) and OPIC (5 per cent).

WOODSIDE - BROWSE LNG PROJECT
Status: In design

As the second of only two FLNG developments planned for Australia at present, all eyes are also on the Woodside Petroleum, joint-venture Browse FLNG project.

In September 2013 it was announced that Woodside’s joint venture partners in the Browse LNG Development had selected the use of FLNG technology as the development concept to commercialise the Brecknock, Calliance and Torosa gas and condensate fields, located offshore Western Australia.

All three fields are estimated to contain Gross (100 per cent) contingent resources (2C) of 15.9 Tcf of dry gas and 435.8 MMbbl of condensate (net Woodside share of 5.0 Tcf of dry gas and 136.4 MMbbl of condensate) – a globally significant resource in a location that is expected to be one of Australia’s next major LNG production provinces.

Participants in the Browse Joint Venture include Woodside as operator, Shell Development Australia, BP Developments Australia, Japan Australia LNG (MIMI Browse) Pty Ltd and PetroChina.

The FLNG concept will involve Shell’s FLNG technology and Woodside’s offshore development expertise for the development.

The project will include three FLNG facilities and extensive subsea infrastructure comprising 57 subsea wells,12 subsea manifolds, more than 190 km of flowlines and 70 km of umbilical cables, which will connect subsea infrastructure to the floating facilities.

The technical elements of the basis for design case, as well as key pre-front-end engineering and design (FEED) work, were completed in December 2014. The joint venture entered FEED phase this year however a final final investment decision is not expected until beyond 2016.

In July the Browse joint venture struck a deal with the Western Australian government clearing the way for the development of the project’s three offshore gas fields. The deal committed Browse to providing around 60 TJ/d and approximately 800 PJ over the life of the project.

Most recently, in August, Technip Samsung Consortium was awarded two major contracts by Shell for the project.

The first of the contracts covers FEED such as the composition of gas, local weather conditions and factors specific to the project site. The second involves the engineering, procurement, construction and installation (EPCI) of the three FLNG units if the project.

First gas from the Browse FLNG project is expected to be realised in 2022, according to Woodside CEO Peter Coleman, although a timeline will be formally decided upon FID.

“By now we have established Australia as a source of expertise in offshore exploration and with developments still in other parts of the world, that expertise will be needed.” - Professor Eric May, UWA Centre for Energy

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