A battle is looming over the Federal government’s push to for the development of Woodside’s multi-billion-dollar Browse gasfield through FLNG, with West Australian Premier Colin Barnett opposed.
Federal Resources Minister Gary Gray and Woodside are reportedly both urging Barnett to remove the existing Browse lease conditions which stipulate the Browse gasfield must be developed onshore at James Price Point.
The retention lease of the WA gas expires in November 2014.
The Australian reports that Gary Gray has ventured to remove any conditions from federal leases covering the Browse permits, allowing for a floating facility to be built.
However reports have emerged that Barnett is irritated over Gray’s insistence that the state urgently remove the conditions, and is drafting a response.
Barnett has previously slammed the use of FLNG stating it would mean less jobs and gas supplies for Australia and has indicated he is prepared to play hardball to ensure gas is processed onshore.
It is estimated that about one-third of Browse gas is located in state waters.
"It should not be assumed that the retention of Commonwealth leases automatically means the same treatment of State leases," Barnett warned.
"If the project is offshore, there's very few jobs for Australia, the whole structure will be built offshore, and indeed there'll be no gas coming onshore at all," he said.
"That'd be a disastrous result for Australia and Australia's natural resources.”
Woodside walked away from plans to develop Browse through a gas hub at James Price Point in April, stating the development concept no longer met the company’s commercial requirements for a positive final investment decision. It is estimated the hub would have cost $45 billion.
Woodside have since announced that itself and Shell have agreed to undertake a framework which would develop the Browse gas field through Shell’s FLNG technology.
"This agreement enables Woodside, as operator of the Browse LNG development, to strengthen our development and operational capabilities through the potential use of Shell's design one, build many FLNG technology," Woodside chief Peter Coleman said.
"It also provides the opportunity for Western Australia to become an industrial, operational and technology centre fro excellent for floating LNG worldwide."
FLNG technology involves using the same components of a traditional land-based LNG plant onto a ship that sits directly above offshore gas fields.
The technology is being used for the first time at Shell’s Prelude gas field off northern Western Australia and allows for the development of gas fields considered too remote or too small to develop via traditional methods previously.
According to research conducted by the Department of State Development and Citigroup, the onshore processing hub at James Price Point was estimated to deliver the Browse partners a profit margin of 11 per cent versus 13.1 per cent for a floating LNG operation.
"No one's making a loss here," Barnett has said.
"If the margin's that narrow, I would have thought the good thing to do for this country would be to sit down and work out how you close that gap."
Gas giant Shell, which has a 27 per cent interest in the Browse venture has previously stated that FLNG could be the saviour of LNG in Australia as high costs continue to hamstring onshore projects.
"We do see it as probably the potential saviour of the Australian LNG industry over the next decade or so,” said Shell Australia’s former chair Ann Pickard.
“Australian LNG is the highest cost globally,” she said, stating that countries like the United States and Canada could export to Japan 20 per cent cheaper.
Woodside, the operator and 31 per cent owner of Browse, was part of an LNG industry warning that $150 billion dollars worth of investment in Australia could be lost if the high cost of building major projects is not fixed within eighteen months.