Royal Dutch Shell’s Prelude floating liquefied natural gas plant in the shipyard of Samsung Heavy Industry in Geoje, South Korea. It was designed to take in the equivalent of 110,000 barrels of oil per day in natural gas and cool it into LNG for transport and sale in Asia. Associated PressAustralia is expected to become the world’s largest supplier of liquefied natural gas by the end of the decade, but significant cost overruns and delays in building new LNG projects are threatening its future competitiveness as companies move forward with major projects in the U.S. and Canada.The solution for Australia may be floating LNG plants, because they can be built overseas, where the costs of labor and materials are generally lower, Australian Industry Minister Ian Macfarlane said.

“If any new LNG project comes to pass [from scratch], it’d be FLNG,” Mr. Macfarlane said in an interview.

Australia is the costliest of the three countries seeing a boom in construction of LNG projects, which are meant to meet rising Asian demand for cleaner-burning natural gas. The seven projects now under development there are facing costs an average of 25% higher than estimated at the time of the investment decisions, the Oxford Institute of Energy Studies said in a September report.Rising wages in Australia in recent years have played a major role in those cost overruns, though higher prices for raw materials and the strength of the Australian dollar have contributed. Australian oil and gas workers earn double the global average, and 35% more than their counterparts in the U.S., according to data from the U.S. Labor Department. That is because of the country’s relatively small population, strict policy toward accepting foreign workers and the large number of natural resources projects there.

High costs are likely to render any future greenfield, or completely new, onshore LNG project now under consideration commercially non-viable, the institute said. There are another 20 Australian LNG projects being considered–including expansions of existing projects–and around a quarter are floating plants, it said.In fact, some floating plants are already under construction in South Korea, including for the Royal Dutch Shell RDSA.LN +4.10% PLC-led Prelude project and the Woodside Petroleum Inc.WPL.AU +1.93%-led Browse development. Both will be located off Western Australia. We want to create jobs for Australians. But if FLNG is the only answer, we’d be happy to accept it,” Mr. Macfarlane said. He declined to specify how much money could be saved by building floating terminals overseas versus developing onshore projects in Australia.

Source : wall street journal