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Shell considered shutting its flagship Prelude liquefied natural gas facility off Australia for a year to fix issues that have plagued its operations, but instead opted for shorter maintenance period to allow it to capture strong gas demand, three industry sources said.
Prelude, whose deck is longer than four soccer fields, was the world's first floating LNG facility to use novel technology and cost over $12 billion, according to estimates.
The facility, some 475 km (300 miles) off the west coast of Australia, has suffered a string of outages since it started production in June 2019, including a fire that led to a full power loss in December 2021.
The shorter maintenance programme, which started in August and is expected to last two months, will not address all the design issues, according to the sources familiar with the matter.
That means the 3.6-million-ton-per-year LNG plant could continue to encounter operational issues, the sources said.
A Shell executive said on Wednesday that Prelude was currently undergoing a major turnaround that would last around two months. The deliberations on an extensive one-year maintenance were not previously reported.
Shell considered late last year performing year-long repairs on Prelude in order to fix a number of design problems, including to its electric system, which was the cause of a number of hiccups, the sources said.
The decision not to go ahead with extended repairs stemmed in part from concerns that Shell would miss out on sales of LNG at a time of strong demand, the sources said.
The company opted for the two-month maintenance at a time of relatively weak global LNG demand, which would allow the plant to be up and running as winter demand in the northern hemisphere, including in China and Europe, kicks in.
RELIABILITY ISSUES
It comes after Shell CEO Wael Sawan took office in January with a vow to improve the company's operational reliability and boost its financial performance. Before becoming CEO, Sawan led Shell's LNG division.
Shell said in response that "turnarounds are a regular part of maintaining LNG facilities and are planned well in advance".
"The current turnaround at Prelude commenced in August and is expected to take several months. This turnaround was originally scheduled to be completed in 2022 but was rescheduled to August 2023 due to industrial action, followed by cyclone season," a Shell spokesperson said.
Prelude has suffered a string of technical problems since its launch in June 2019 that resulted in at least 500 days of shutdown, including throughout 2022 when LNG prices soared in the wake of Russia's invasion of Ukraine, according to Reuters calculations and industry sources.
The current maintenance is scheduled to tackle dozens of fixes to address reliability issues including with the electric system, pumps valves, compressors and vibration issues, according to the sources.
Two of the sources said the repairs would tackle the most urgent and significant problems but were unlikely to resolve all of the reliability issues with the facility, which is likely to face further outages in the future.
Cederic Cremers, executive vice president of Shell's LNG business, said on Wednesday Prelude was currently undergoing "major turnaround" work that started in August and will be ongoing for roughly two months.
"(We) continue to have smaller issues that we have to resolve based on the novel nature of the operations and the facility there, but we've seen very strong improvement over the first half of the year," he said.