Australia’s Woodside has entered into an agreement with Shell that could see the companies use a Floating LNG solution to develop their deepwater Browse Basin gas resources.

The agreement between the two companies sets out the key principles that would apply if the resources are developed using Shell’s FLNG technology, which the latter is already employing on its giant Prelude LNG project (see picture) also offshore Western Australia, which will come onstream in 2017.

The agreement, said Woodside, provides a framework that would enable the Browse joint venture to progress FLNG as a development concept. Woodside will immediately engage with the joint venture participants regarding the agreement, the extent of work on alternative development concepts and the obligations under the Browse retention leases, it added.

The selection of any development concept requires approval by the Browse joint venture participants.

Earlier last month Woodside confirmed it was pulling the plug on the JV’s original Browse development plans for an onshore LNG plant near James Price Point after a technical and commercial evaluation determined that the concept did not meet the company’s commercial requirements for a positive final investment decision. At that time it said it would engage with its partners to recommend the evaluation of other concepts to commercialise the Browse resources, and said that that would include floating technologies, a pipeline to existing LNG facilities in the Pilbara or a smaller onshore option at the proposed Browse LNG Precinct near James Price Point.

Woodside CEO Peter Coleman said that FLNG had the potential to commercialise the Browse resources in the earliest possible time frame, and would further build the company’s long-standing relationship with Shell, which is a partner in the Browse JV. “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,” said Coleman. “It also provides the opportunity for Western Australia to become an industrial, operational and technology centre for excellence for floating LNG worldwide.”

Woodside is the operator of the East and West Browse joint ventures, holding a 34% equity interest in the East Browse JV and a 17% equity interest in the West Browse JV.

Woodside’s move puts the FLNG option in pole position for the job, and underlines the progress the floating liquefaction solution has made in recent years, with its most high-profile pioneer projects being Shell’s plans for one on its Prelude development, and another by Inpex offshore Indonesia.

Woodside’s CEO Coleman went on: “The costs escalation on Browse has been consistent with other projects in Australia. Unfortunately, the cost escalation has been such that the total costs for Browse have resulted in the current development not being commercial. The decision is a commercial one.”

On the search for a new development solution, he continued: “We’ve been monitoring different development options as we’ve been progressing our reference case. Over the past two to three years there have been a number of factors which have changed in the LNG industry, such as costs and technology for example.

“One of the alternatives is FLNG technology and that is something we will recommend the joint venture consider as we move forward. There are other possibilities which we have looked at previously; those other options could include a pipeline to existing facilities in the Pilbara and a smaller onshore option around James Price Point. It is too early to say if any of those are commercial.”

Browse holds reserves of 15.5 Tcf (439.1 Bcm) of dry gas and 417 MMbbl of condensate.

Coleman said: “I am confident that we can begin basis of design work on new concepts in the near future, paving the way for another phase of Front-End Engineering and Design, and ultimately a Final Investment Decision.”