July 30, 2010 / 5:03 AM / 10 years ago

UPDATE 1-Australia defers ruling on Shell's Prelude LNG

* Environmental review for Prelude deferred until Oct 1

* Third Australia LNG project to face regulatory delays

* Shell says on track to make FID in early-2011 (Adds details, background)

PERTH, June 29 (Reuters) - Australia’s federal environment ministry has deferred a ruling on Royal Dutch Shell’s (RDSa.L) untested floating liquefied natural gas (LNG) project for the third time, threatening to delay the project’s target timeline.

Federal Environment Minister Peter Garrett had been due to announce a decision on Friday on Shell’s Prelude plan to develop the world’s first floating LNG plant off western Australia, but the ruling has now been put off until Oct. 1 since the government is in a caretaker mode in the run up to the Aug. 21 election.

This is the third LNG project to see a government delay of an environmental review, bringing the total value of gas export projects awaiting federal clearance to an estimated A$45 billion.

“The department has extended the deadline on the Shell Prelude decision until after the caretaker period,” said a department spokeswoman.

“This is the first proposal to build a floating LNG facility in the commonwealth marine area and therefore requires a ministerial decision to be made.”

The environment ministry has previously deferred a ruling on Prelude twice, after Shell turned down the department’s demands for the energy major to submit a proposal on how it would mitigate the project’s greenhouse gas emissions. Shell said it would rely on buying permits under a carbon trading system should emissions trading be introduced.

The series of delays could be a setback for Shell, which is targetting to make a final investment decision decision on Prelude next year and for production to start in 2016. The project has also secured some sales to Japan’s Osaka Gas (9532.T). [ID:nTOE66606H]

A Shell spokeswoman said studies have shown that Prelude would have a “very low overall environmental impact” and that it was on track to make an investment decision in early 2011.

Analysts have estimated that Prelude, which would produce 3.6 million tonnes of LNG per year and 1.3 million tonnes of condensate, would cost between $8 billion to $10 billion.

Earlier this month, the minister deferred decisions on two separate coal-seam gas-to-LNG projects proposed by Australia’s Santos Ltd (STO.AX)’s and Britain’s BG Group until Oct. 11, citing concerns about their water management plans and that the salt extracted could have a long-term impact on ground water. (Reporting by Fayen Wong; Editing by Ed Davies)

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