Shell Australia returns $4 billion to global parent despite another hit on Prelude LNG project

Shell has taken another hit on its floating Prelude LNG project in north-west WA as its Australian profits were savaged by nearly $2 billion of new writedowns last year.

The oil and gas giant’s Australian arm has revealed net earnings for 2023 fell to $US632.7 million ($990m) from a record $2.7b for the year earlier after the latest impairment on Prelude was augmented by a hit on its exit from the Woodside Energy-led Browse gas venture.

Newly-filed accounts for Shell Energy Holdings Australia do not split the $US1.1b of writedowns but say the Prelude impairment was “triggered by factors including regulatory changes and revised production estimates”.

Prelude, which is anchored by the world’s biggest gas processing vessel over fields 475km north-east of Broome, is thought to have cost as much as $US19b to develop after a serious of blow-outs during construction.

However, it has yet to get a sustained run at production since shipping its first cargo in 2019. The past five years have been marred by teething problems, safety issues and industrial relations disputes.

The 3.6 million tonnes-a-year offshore LNG plant only returned to production in December after a four-month maintenance shutdown.

Shell wrote billions of dollars off Prelude’s value when energy markets tanked in 2020, with accounts for that year showing $US6.7b in impairments across the local business.

The latest Australian profit fall was also influenced by higher interest charges, increased costs and an unrealised $US485m loss on Shell Energy’s derivative contracts.

Revenue for the 12 months to December 31 was down 9 per cent to $US8.2b, reflecting last year’s lower prices for oil and gas after a bumper 2022 driven by the price spike that followed Russia’s invasion of Ukraine.

Nonetheless, the business nearly quadrupled its dividends, returning $US2.7b to its London-based parent in 2023, up from $US700m previously.

As well as Prelude, where it is the 67.5 per cent owner, Shell has 25 per cent of Chevron’s Gorgon LNG project and a one-sixth interest in the Woodside-operated North West Shelf development. It also operates the Queensland Curtis LNG venture and has 50 per cent of Queensland coal-seam gas company Arrow Energy.

During the year, it sold its 23 per cent stake in the Browse joint venture to co-partner BP for “strategic” reasons, saying the potential $30b development no longer fitted its portfolio.

As well as the Prelude writedown, Shell Energy said it also booked an impairment on Browse “triggered by (the) sale of Shell’s equity”.

The Australian result was included in the $US19.3b global annual profit disclosed by Shell in February.

Its WA and Queensland businesses accounted for one-third of the group’s global LNG production of 28.3Mt in 2023.

Just two weeks ago, Chevron Australia also revealed a sharply lower annual profit of $US4.5b on a 20.5 per cent fall in revenue to $US12.1b. It returned $US5.2b in dividends to parent Chevron Corporation for the year.