LNG Academy Episode 2: Prelude LNG

Alex Taimuri

Good morning folks, and welcome back to LNG Academy Episode 2. Today, we’ll be talking about Prelude LNG, the world’s largest floating LNG facility. I’d like to welcome back my co-host Mehdy. [Speaking French] Ça va Mehdy?

Mehdy Touil

[Speaking French] Je vais très bien Alex, merci.

Alex Taimuri

[Speaking French] Ah très bien, très bien.

So Medhy, let’s start talking about Prelude LNG. Can you give us a few numbers about Prelude LNG?

Mehdy Touil

Yes, where do we start? With close to 500 meters long, Prelude is not only the largest floating LNG facility in operations but also the largest offshore facility ever built. We are talking about more than 260,000 tonnes of steel for a displacement of six times that of a large aircraft carrier. The construction started in 2012 with the EPC led by Technip and Samsung. The vessel was positioned offshore Australia in December 2017 while the initial production started a year after in December 2018. The first cargo was loaded in June 2019. Prelude has a 3.6 MTPA LNG production capacity using Shell dual mixed-refrigerant technology, the DMR process. The Nuovo Pignone MR compressors are driven by GE 60 MW steam turbines and power for the facility is provided by three Mitsubishi steam turbines with an output of 40 MW each. The seven Kawasaki boilers installed on Prelude are also the largest ever built for marine operations. As you can see, an all-steam configuration which was a key design selection from Shell but also a choice heavily debated within the industry.

Alex Taimuri

Do you think that going full steam, pun intended, was a wrong decision?

Mehdy Touil

At the time of the project inception, the technical requirements of a floating facility the size of Prelude were far beyond the limits of offshore knowledge, and I am sure the designers went through extensive analysis and modelling over years before deciding on the final configuration. Of course, there were also economical requirements that needed to be considered but judging from the initial cost per tonne of LNG produced, the project was on the right track, at least initially. At that time, FLNG technology was considered an important milestone for the LNG industry to help reduce the cost of developing LNG projects and unlock stranded gas assets. Not necessarily true as we have seen later. As for steam turbines and in contrast to the gas types, steam turbines have higher reliability in terms of maintenance. They can run over a wider speed range and are not impacted by changes in ambient temperatures. You also eliminate the high-pressure fuel gas piping needed to feed gas turbines, a bonus for offshore facilities. So no, I would say that Prelude troubles are not the result of the steam-turbine configuration per se for both compression and power generation. It is true that there were some integration issues between the steam turbines, the generators and other systems in the facility, but I`ve heard that those issues were sorted out in 2020.

Alex Taimuri

Excellent. Well, Prelude, we’ve heard a lot about it over the years; it’s made the news several times, but not always for good reasons. Can you let us know why?

Mehdy Touil

Unfortunately, that’s true. A series of incidents contributed to the general perception of the project as having technical and operational difficulties. We have seen extended shutdown periods, problems with the Australian offshore regulator, NOPSEMA, as well as a pay dispute with powerful trade unions leading to lengthy strikes. Certainly not the expected outcome for a $17 billion dollar facility, and Shell’s LNG flagship has been suffering massive cost overruns. It is true that similar large-scale projects have not been faring better too in terms of CAPEX.

Alex Taimuri

So not just technical issues have affected it. Would you say, from a technical point of view, the main issue has been the power generation package?

Mehdy Touil

The first serious problem encountered by Prelude was concerns about the integrity of the mooring lines. Back in 2019, and before the loading of the very first cargo, the facility was shut down after it was discovered that the steel mooring lines were wearing faster than expected and raising concerns about the stability of the floating structure. It took several months to procure and replace all 16 mooring lines, a period during which Shell was ordered by the offshore regulator, NOPSEMA, to delay the start-up of the facility until June 2019.

Alex Taimuri

I see. What about the electrical issues onboard that we’ve been hearing about?

Mehdy Touil

Several incidents were recorded during the first year of operation, including loss of containment reports. However, the very first major electrical trip happened on February 2020. The backup diesel generators for essential power could not be started, posing a serious health and safety risk to the personnel onboard. Prelude was shut down for eleven months as a result. After investigation, the offshore regulator, NOPSEMA, concluded that Shell’s safety management system onboard Prelude, the SMS system, was deficient. Also, while most of the subsea wells were shut-in as a result, the facility kept flaring a considerable amount of gas during that period.

Again, in December 2021, after the detection of a small fire, a manual total emergency shutdown ESD-1 shutdown was decided, followed by depressurization. With no gas available to feed the boilers and generate steam, Prelude experienced a total loss of power, followed by the failure to restore it despite multiple attempts over several days to start the three emergency diesel generators that have a combined output of 23 MW for essential power. The staff was evacuated by helicopter and boat because of the degraded living conditions onboard.

Everything went down: lighting, communication systems, HVAC, potable water, and even sewage systems. You have also the loss of heat tracing to prevent the cooling of steel structures in the vicinity of the LNG tanks, which is a potentially catastrophic scenario. A main power plant trip, although a rare occurrence, can happen in any LNG facility, but a loss of plant air followed by backup emergency system failure is an extremely serious incident. You also don’t want your emergency shutdown or depressurization systems running on batteries that will last for a few hours only. The regulator, NOPSEMA, concluded at that time that the operator, Shell, did not have a sufficient understanding of the risks of the power system on the facility, including failure mechanisms, interdependencies, and recovery. Shell was also asked to demonstrate that the facility can safely recover essential power and associated essential services following a loss of power and that the safety systems and essential support systems operate to maintain the safety of personnel onboard. That shutdown lasted for four months.

From July to September 2022, production was again disrupted by a worker union strike. Most recently, in December 2022 and after roughly two months of maintenance, production was again suspended for several weeks following a fire inside a turbine enclosure and pending investigation, another major setback for the operator. While we don’t have the exact details of these issues and the solutions implemented by Shell because they are not publicly available, there are still significant challenges for the Prelude LNG project.

There are some other minor incidents that were not reported because they didn’t have a major impact on the overall operation of the facility but are still worth mentioning: the complicated blowdown model, some control and shutdown valves not designed for cryogenic service, corrosion on deluge valves fittings for the firewater system.

Alex Taimuri

That’s quite a long list, Mehdy. I just want to circle back though; what was the major issue with the emergency diesel generators?

Mehdy Touil

I couldn’t find any official reports but from what I’ve heard, a high bearing temperature resulting from excessive load tripped one EDG, and upon trip the load was transferred to another EDG and it could not handle the load as well, leading to a loss of emergency power. The high bearing temperature was attributed to a restricted cooling water flow. I suppose that the issue was rectified during the long maintenance window.

Alex Taimuri

Well, we heard a lot there. In conclusion, what can we sya aboput this so far? Prelude LNG, is it a success or a failure?

Mehdy Touil

While Shell has never revealed the exact CAPEX of the vessel, it has also never revealed the operational cost of its floating experiment. In 2020, Goldman Sachs said that Prelude was the world’s most expensive new LNG project at four times the cost of LNG produced by Qatargas, the leader in terms of pricing. Having a $17 billion dollar facility unable to reach nameplate capacity over extended periods while global LNG prices reached an all-time high is becoming a serious headache for Shell and for other shareholders of the project, Korean KOGAS, Japanese INPEX and Taiwan CPC. Still, the giant vessel is considered by many a marvel of engineering and Shell continues to believe in the long-term viability of the project. Last year, the go-ahead was given for the $2.5 billion dollar development of the Crux gas fields to backfill Prelude, starting from 2027.

Prelude has demonstrated the potential risks associated with large-scale floating LNG, and the importance of having robust safety systems in place to protect workers and minimize the impact of incidents on offshore facilities.

I am sure that many lessons learned from Prelude were incorporated by Technip, the EPC contractor, into the design of its little sister, ENI’s Coral LNG.

Alex Taimuri

I think that’s the keyword you’ve said: lessons learned. Being an entrepreneur myself, I don’t look at these things as failures but as opportunities to learn. I’m sure that the operator learned quite a bit and we know that the opportunity for floating LNG is there. We’re seeing now reports for the Leviathan LNG project, which would be maybe even bigger than Prelude from what I’m hearing. I think you’re absolutely right, the lessons learned here will carry on, and that’s really the objective of today’s episode, is to really unpack some of these lessons learned here for the greater LNG technical community. So, thank you Mehdy, that was a very in-depth analysis, and I hope the audience also saw the value of the episode today. Thank you everyone for taking the time to tune in. Thank you very much and look out for episode 3!

Mehdy Touil

You’re welcome.