Next time, it might make more sense – and even Slugcatcher can see a certain logic that did not exist before.
The original use of sequencing in an LNG sense was courtesy of Roland Williams, then chairman of Shell in Australia.
In a famous interview conducted while Roland was in Tahiti, or some other Pacific Island, he told a reporter that Shell was the best company to speak for the regional LNG industry because it could “sequence” the development of competing projects.
What Roland meant, and it must have made sense to him, was that too many LNG projects coming on line at the same time would create excess competition, and force down the price of liquefied gas.
Sadly for dear old Roland, who went on from Shell to head up the ill-fated Australian Magnesium project (no sequencing required there) his use of the dreaded “s” word caused no end of trouble for Shell when it tried to acquire Woodside Petroleum.
Tut tut, went the tongues of the chattering class in Canberra. If this mob from Shell get control of Woodside they will be sequencing LNG projects in an order that best suits Shell, but which might not suit Australia.
It is history that the “s” word killed Shell’s ambitions to own all of Woodside.
So, you may ask, what has changed in Slugcatcher’s febrile mind which now makes the “s” suddenly acceptable.
The answer, somewhat curiously, is related to competition, as it was with Shell v Woodside, but in a different way.
Competition, in case no-one had noticed, is doing terrible things to the cost of resource project development in Australia. Shortages of everything, from electricians and pipe fitters, to tractors and latrines, is pushing prices through the roof.
A few weeks ago, the competition crush killed a small goldmine re-development plan. View Resources, which had been enormously proud when it acquired the Bronzewing mine from Newmont, was forced to admit that shortages and costs had stopped plans to re-open the mine, leaving about $600 million worth of gold untapped.
In View’s opinion, higher steel, labour and contracting charges had added around 30% to the re-development cost at Bronzewing.
Where you read gold, substitute LNG because the same forces of competition are wafting through the oil and gas sector. They must, because Australia is a small market and a shortage of skilled workers is a shortage of skilled workers, no matter what the industry.
It is with this in mind that the Slug started thinking about sequencing, and perhaps why Woodside has put on its skates to get train five on the Burrup Peninsula up and running as soon as possible, because if it doesn’t there’s a logjam of LNG proposals heading straight for the north-west corner of Oz.
Train five, with a price of $2 billion, is a relatively small, and eminently do-able project using available skills and material.
It would be a totally different matter if ChevronTexaco put on its own size-10 skates and launched the $11 billion Gorgon project at the same time, and then BHP Billiton (with, or without ExxonMobil in tow) gave the green light to the Scarborough development.
Crowded is one word that springs to mind. Sequencing, and its importance, is another. Sorry is a third, because that’s what should be said to Roland Williams because he unfortunately used the right word at the wrong time.
