Energy major Royal Dutch Shell plc (RDS.A) has approved the final investment decision for the proposed Prelude floating liquefied natural gas (“LNG”) project in Australia. The green light for the development – located in the Browse basin off Western Australia's northern coast – marks the first time that construction of such a vessel has been sanctioned anywhere.
The $10 billion facility, touted as the world’s largest floating manmade object with a capacity of 3.6 million tons-per-annum, has already received necessary government authorizations.
Shell’s first shipment from Prelude, which has estimated reserves of 2.5–3.0 trillion cubic feet of gas plus 120 million barrels of condensate, is expected in 2016. The project will consist of an LNG train aboard a huge vessel that will then produce gas from far-off fields which have been inaccessible up to now, before liquefying it and transferring it to an LNG tanker.
The business environment for LNG remains robust, with demand likely to grow at around 8%−10% annually over the next few years in all major markets. The Prelude project – a brand new application of LNG technology – provides The Hague-based behemoth an attractive strategic position for serving the fast-growing economies of China and India, and also other Asian countries.
Royal Dutch Shell – Europe's biggest oil company by market value ahead of BP plc (BP) and Total SA (TOT) – owns one of the largest integrated energy businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.
Royal Dutch Shell ADRs currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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