Only a fraction of the natural gas export projects being developed around the globe will become reality as high costs and weakening gas prices torpedo those that until recently promised huge returns on investment. Large natural gas field discoveries on and offshore have prompted several countries to plan liquefied natural gas (LNG) export projects, including in North America, Australia, East Africa and the east Mediterranean. But high development costs and low profit margins in the gas sector mean most of these will fail, Royal Dutch Shell’s director of projects and technology told Reuters in an interview. “There is always so much talk about these big LNG projects around the world, but only a small fraction of them will get built,” said Matthias Bichsel, who is also a member of Shell’s Executive Committee. “Costs in the oil and gas sector are still on the rise and outpacing inflation, and gas projects are extremely price-sensitive because the margins are so thin,” he added. Bichsel, without commenting on specific projects, said that in Australia, high labour costs had caused problems for developers. The country hopes to overtake Qatar as the world’s biggest LNG exporter.
Shell is building the world’s first floating liquefied natural gas (FLNG) project in Australia, named Prelude, which will be the biggest maritime vessel ever constructed. It also has a 25 percent stake in the massive Gorgon LNG project on Australia’s western coast, led by Chevron. The development’s costs have soared from initial estimates of $37 billion in 2009 to almost $55 billion on the back of high labor expenditures and complex technology.