French energy giant GDF Suez says it is reconsidering a huge project for a floating gas liquefaction factory off northern Australia and might opt to build an undersea pipeline to Darwin.
The gas fields concerned continue to have “material value”, the company said on Thursday.
But using a floating liquefaction plant to process the gas does not satisfy business criteria, the group said, in an important announcement for the Australian energy sector.
The overall project, called Bonaparte, involves an ambitious scheme using advanced technology to generate liquefied natural gas from resources off northern Australia.
The development of floating liquefaction plants is at the forefront of efforts to turn Australia into a leading supplier of LNG in Asia.
Liquefied natural gas is being developed worldwide and notably in North America to process gas from shale fields so it can be transported in LNG tanker ships.
GDF Suez is a leading company in the sector and the biggest importer of LNG into Europe.
It said with its Australian partner Santos it was considering “other potential development options” for three gas fields west of Darwin and 250 kilometres out to sea.
“These options will include a pipeline connection to Darwin,” GDF Suez said in a statement.
There is already a gas liquefaction plant in Darwin of which Santos is a minority shareholder.
The project is known as Bonaparte LNG and the three fields are Petrel, Tern and Frigate.
GDF Suez and Santos “firmly believe that fields have material value,” the statement said. But “their future development using floating LNG (liquefied natural gas) technology, although technically robust … does not currently meet companies’ commercial requirements.”
GDF Suez said “consequently, the proposed Bonaparte floating LNG project will not be taken into front-end-engineering and design phase at this point in time.”
French oil and gas engineering group Technip was in competition with US firm KBR to work on the floating plant project.
In September, GDF Suez delayed for a year its final decisions for investment and operations for the Bonaparte project. It indicated then that it might take its decision on investment in 2015 and target opening operations in 2019.
The project for a floating LNG processing plant capable of liquefying 2.0 million tonnes of natural gas per year, was intended to enable GDF Suez to develop deliveries to markets in Asia.
The partners have never put a value on the cost of the enormous project in which GDF Suez would hold 60 per cent and Santos 40 per cent.
Several other projects for floating LNG plants are under construction or being built in Australia.
Among these is the pioneer project called Prelude, headed by British-Dutch group Shell, and a vast project called Ichthys in which French energy group Total has an interest.
The floating factories are a solution for fields which could not have been developed previously.
The development of the technology opens the way for Australia to become a big LNG producer. However, the technical problems and costs involved are huge.