Royal Dutch Shell has decided to go ahead with the world's first floating liquefied natural gas (LNG) project offshore Western Australia.
Shell announced it would proceed with the approximately $US12 billion ($A11.27 billion) Prelude project in the Timor Sea, near the Ichthys LNG project planned by Japan's Inpex and France's Total SA, at a press conference in Perth on Friday.
Shell also told reporters the stalled Sunrise LNG project in the Timor Sea was next on the energy giant's agenda.
The Prelude project is expected to be a game changer for the gas sector, using vessel-based gas processing technology that promises swifter, cheaper development of remote fields once considered "stranded".
Malcolm Brinded, Shell Upstream International executive director, said the project was a colossal undertaking, with the floating facility set to be almost half a kilometre long and able to withstand a category five cyclone.
It will be the largest floating structure ever built and will be permanently moored in water about 250 metres deep during its 25 years of production.
Output is expected to be 3.6 million tonnes per annum (Mtpa) of LNG, 1.3 Mtpa of condensate and 400,000 tonnes per year of liquified petroleum gas.
Mr Brinded said the project was an engineers' dream that involved fitting the vessel's technology into an area one quarter of the size of an equivalent onshore LNG plant.
Federal Minister for Resources and Energy Martin Ferguson said Prelude was also an economist's dream because it was expected to add more than $45 billion to Australia's economy and improve the nation's balance of trade by at least $18 billion.
The Prelude field was discovered in 2007 and first production is expected around 2017.
While Daewoo Shipbuilding has claimed its venture with Papua New Guinea's Petromin and Norway's Hoegh LNG will be the first floating LNG project, Prelude is widely considered to be the one to take that title.
Certainly, it's the first to reach a positive final investment decision.
Both Mr Brinded and Shell Australia chair Ann Pickard would not comment on the capital expenditure estimate for Prelude.
However, he said LNG projects typically cost $US3 billion to $US3.5 billion to develop per million tonnes of output.
"This is in the same ballpark," Mr Brinded said.
He said it was feasible Shell could undertake several floating LNG projects in coming years, with Sunrise next on the list.
The fact the Woodside Petroleum Ltd-led Sunrise joint venture has settled on a floating concept is the reason it has effectively been blocked by the East Timor government, which wants a processing plant built in East Timor.
"We need the support of the Australian government and the Timor-Leste government, and we hope that will be forthcoming," Mr Brinded said.
"But our view is there will be many applications for floating LNG for stranded gas that's remote from shore."
This included other companies wanting to tap into Shell's floating LNG technology and expertise.
Mr Brinded said government studies had shown there was 140 trillion cubic feet (tcf) of stranded gas in Australian waters that was yet to be developed.
Shell plans to spend between $30 billion and $50 billion on Australian LNG projects over the next decade.
These include the Chevron-led Wheatstone and Gorgon projects and the Woodside-led Browse project, all in WA, and the Queensland coal seam gas assets it acquired last year from the takeover of Arrow Energy Ltd.