Shell CEO: time to innovate to reduce LNG costs

The LNG industry needs to continue to innovate to drive down capital costs across the LNG value chain to make gas competitive with other sources of energy such as coal and renewables, Ben van Beurden, CEO of LNG giant Shell said on Tuesday.

“The most important areas to focus are design engineering and construction. LNG plants have become more expensive because we take more time to engineer them: because we face lower productivity when we build them; and because we are often working in more complex locations,” van Beurden said in his opening speech at the LNG18 conference currently being held in Perth.

According to the CEO, the industry needs to reverse this trend, and, standardisation of design, engineering and construction is one key factor.

Another one is working more effectively and efficiently in the supply chain, van Beurden said, adding that Shell is “playing its part in these areas”.

A case in point is Shell’s giant Prelude floating LNG project expected to start production offshore Australia this year.

“Floating LNG will be used to help open up remote gas fields; fields that in the past would have been considered too costly or difficult to develop. Prelude, as a pioneering project, is well into its construction phase and we’ve taken the learnings from this.”

According to the CEO, there now is a standardised design. Depending on the composition and location of gas reservoirs, “we can add different pre-designed topside modules and offloading systems”. And, working with “our strategic suppliers, the project also led to spinoffs.”

“Prelude is designed to export LNG, LPG and condensate from resource-rich gas fields.  But, there are also a lot of so-called lean gas fields which do not produce as much LPG and condensate. To produce more LNG instead we’ve made some changes to the Prelude design and developed ‘FLNG Lean’. We expect FLNG Lean to be cost competitive for larger, lean gas fields,” van Beurden said.

Innovation is the future

According to van Beurden, this example and many others show us that the future of the LNG industry is about continuous innovation.

“Energy is at the heart of innovation. But innovation is also at the heart of energy and its future. In its fight against climate change, the world seeks to move towards an energy system with fewer CO2 emissions,” van Beurden said.

However,  finding long-term solutions trough innovation is “not the only thing we need to be thinking about“. “In the battle against climate change, existing, proven shorter-term solutions matter too. The use of more natural gas is one of these solutions,” the CEO said.

“I know that these are tough times for our industry, but low prices have one major benefit: they make gas a more attractive choice for consumers,” he said.

“So now is the time to make sure that gas gets the place in the energy mix that it deserves,” van Beurden concluded.

LNG World News Staff