Reportedly, after several years of delay, production at Royal Dutch Shell (LON:RDSa) plc’s RDS.A flagship project, Prelude floating liquefied natural gas (FLNG) facility, is set to commence by the end of this month. Notably, the project had been grappling with ballooning capital cost due to challenges and delays in the construction of the complex vessel since 2012. Nonetheless, final preparation for the project to come online has been ongoing since June 2018, when Shell introduced gas to the FLNG unit as part of the cooling process.
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Prelude, which is the world’s biggest floating gas-export vessel, is around 50% bigger than the largest aircraft carrier and is constructed by Technip (PA:FTI) Samsung (KS:005930) Consortium in South Korea. The project is a joint venture among Shell, Inpex Corporation, Korea Gas Corporation and Taiwan’s CPC Corporation, with Shell being the chief operator, owning a 67.5% stake in the project.
Prelude will handle the production, liquefaction, storage and transfer of LNG at sea, as well as processing, exporting and condensation of liquefied petroleum gas. The facility has a production capacity of around 5.3 million tons per annum (mtpa) of liquids, with LNG accounting for 3.6 mtpa or 68% of the total capacity. The $12.5-billion project is expected to generate cash flow from the next year and boost Shell’s Integrated Gas business.
Being a significant project in the portfolio of Shell, Prelude FLNG is a path-breaking facility for the emergence of floating LNG. Notably, it is also the first and the most versatile in the line of projects planned by the company. The facility will enable the company to unlock new offshore energy sources and provide LNG around the world.
As it is, the $50-billion buyout of BG Group has diversified Shell’s portfolio, making it one of the leading producers of LNG. With LNG demand likely to rise to around 500 million tons per annum by 2030 on the back of strong consumption from Asian importers like China, South Korea and India, Shell’s position as a major supplier of LNG should help the company meet the fuel’s growing demand and allow cash flow to grow even further. In this regard, the company also made its final investment decision on the LNG Canada project this year.
Zacks Rank & Key Picks
Royal Dutch Shell currently carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector can opt for some better-ranked stocks given below:
Houston, TX-based Enterprise Products Partners L.P. (NYSE:EPD) holds a Zacks Rank #1 (Strong Buy). The company’s earnings for 2018 are expected to surge more than 36% year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Rome, Italy-based Eni S.p.A. (NYSE:E) has a Zacks Rank #1. Its earnings for 2018 are expected to grow more than 100% from the 2017 level.
Houston, TX-based Shell Midstream Partners, L.P. (NYSE:SHLX) carries a Zacks Rank #2 (Buy). The company’s profits for 2018 are expected to grow nearly 20% from 2017.
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Shell Midstream Partners, L.P. (SHLX): Free Stock Analysis Report
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Eni SpA (E): Free Stock Analysis Report
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