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Shell lifts stake in Australia's Browse LNG, while Chevron heads for the exit


Royal Dutch Shell Plc will increase its stake in Australia’s Browse LNG project by picking up Chevron’s equity in the US$30-billion venture in an asset-swap deal, opening up the possibility of new development options such as floating LNG.
Browse LNG has been plagued by controversy over its proposed location at James Price Point on the northwestern coast of Australia, which has been opposed by some project partners, environmentalists and Aboriginal landowners.
“Shell’s increased participation may promote alternative development options such as floating LNG, should a land-based project prove to be too expensive or too impractical,” Morgan Stanley analyst Stuart Baker said in a note to clients.
Shell is regarded as the industry leader in developing floating LNG and expects to bring the world’s first floating LNG, Prelude LNG, online by 2017.
Shell will pay US$450 million and swap interests in two fields off the Australian coast for Chevron Corp’s holdings in the Browse LNG project, Shell said in a statement on Monday.
The deal will increase Shell’s share in the development to around 27 percent, according to analysts, and make it the second largest shareholder after operator Woodside Petroleum.
But the exit of Chevron, which is a partner in Woodside’s North West Shelf LNG, may also decrease the likelihood of Browse LNG piping its gas to that facility as an alternative to the development of a plant at the James Price Point location, analysts said.
Woodside is scheduled to make a decision on whether to go forward with the James Price Point location by mid-2013.
BP, Japan’s Mitsui & Co and Mitsubishi Corp (MIMI) and BHP Billiton also hold equity interests in the development.
Australia, which is expected to surpass Qatar as the top LNG exporter by the end of the decade, has more than US$170 billion worth of LNG export projects under construction.
As part of the deal, Shell will exchange a one-third interest in the Clio and Acme fields in the Carnarvon Basin off northwest Australia for a 16.7 percent interest held by Chevron in the East Browse block and a 20 percent interest it holds in the West Browse block.
The swap would help Chevron expand its Wheatstone area resource base in Western Australia.
Chevron plans to increase production at the US$29 billion Wheatstone plant to 25 million tonnes per year (mtpa) from the 8.9 mtpa of LNG currently under construction. Wheatstone LNG is expected to start exporting gas in 2016.
Buying Chevron’s interests in the Browse LNG project in Western Australia means Shell will hold a 35 percent interest in the West Browse block and 25 percent interest in the East Browse block. The asset exchange is subject to governmental approval.