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Royal Dutch Shell Plc, Europe’s largest oil company, won approval from the Australian government to proceed with the development of the world’s first liquefied natural gas project using a floating plant. Prelude, located about 200 kilometers (120 miles) off the coast of Western Australia, was approved with “strict conditions,” Environment Minister Tony Burke said in a statement today.

The Hague-based Shell must comply with 13 requirements to protect the marine ecosystem and minimize the risk of oil spills. Shell plans to use what will be the world’s biggest ship to tap fields in the Browse basin off Australia’s northwest coast, where more than a third of the nation’s known offshore gas is located. Prelude is among A$200 billion ($198 billion) of proposed LNG developments in the country seeking to take advantage of increasing Asian demand for cleaner-burning fuels.

“It is going to be a game changer,” said Tony Regan, a consultant at Singapore-based Tri-Zen International, who previously worked for Shell’s LNG business. If Shell goes ahead with Prelude it’s “going to be a great seal of approval on the concept of floating LNG technology.” A development decision on Prelude is expected in 2011, Shell spokeswoman Claire Wilkinson said by phone from Perth today.

Chilling gas to liquid form on floating facilities has yet to be deployed commercially. Inpex Corp. of Japan and Australia’s Santos Ltd. are among companies investigating the technology. Development Design Shell is in the engineering and design phase for the Prelude project, Australia country chair Ann Pickard said in a separate statement.

Environmental approval is an important step, she said. “Floating LNG technology reduces the project’s cost and environmental footprint,” Pickard said. “It removes the need for offshore compression platforms, long pipelines to shore, near-shore works such as dredging and jetty construction, and onshore development.”

Shell has ordered 10 of the $5 billion floating production vessels, which are almost 50 percent larger than a U.S. aircraft carrier. The company expects to begin production in 2016 at Prelude. The ships will weigh about 600,000 metric tons and be around 480 meters long, 75 meters wide, and are designed to withstand a “one-in-10,000-year” tropical cyclone, Shell Executive Director for international exploration and production, Malcolm Brinded, said last year.

Oil Spill Plan “Shell must develop an oil spill contingency plan, to the government’s satisfaction, specifying how it will minimize the risks of” leaks, Environment Minister Burke said. “Should such an accident occur, the company will pay for any environmental rehabilitation needed.” The Australian government deferred a decision on Shell’s Prelude gas venture four times.

Floating LNG technology is aimed at developing gas deposits too small or too far from the coast to be profitably exploited through onshore plants. Prelude is expected to produce about 3.6 million metric tons of LNG annually and 1.3 million metric tons of condensate, a type of light oil, Shell spokeswoman Wilkinson said.

The company needs approvals for production licenses before a development decision can be made, she said. LNG is natural gas chilled to minus 161 degrees Celsius (minus 258 Fahrenheit) reducing it to liquid form one-six- hundredth of its original volume, so it can be transported by ship to destinations unconnected by pipeline. On arrival, it’s turned back into gas for distribution to power plants and households.


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