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Shell's (SHEL) Prelude LNG Facility to Restart in December

Shell plc SHEL is nearing the completion of extensive maintenance at its Prelude liquefied natural gas (LNG) facility off the coast of Australia, with plans to resume exports next month, per industry sources and shipping data. This move comes at a crucial time, aligning with the peak consumption in major markets like China and Europe, driven by the heightened demand during the winter in the northern hemisphere.

Let’s delve into the details. It is evident that Prelude's comeback is not just a routine occurrence but a milestone in the LNG industry.

Maintenance Progress and Strategic Timing

The maintenance process initiated in August is entering its final stages. Shipping data reveals that the LNG tanker Symphonic Breeze will arrive at the floating facility on Dec 6, signaling the pending completion of the extensive maintenance efforts. While Shell is discreet about the specifics, the British company anticipates a production ramp-up in December, highlighting the calculated precision with which the maintenance has been executed.

Prelude's Unique Challenges and Complexities

Prelude, with a deck longer than four soccer fields, represents innovation in LNG technology. Costing more than $12 billion, it has been a trailblazer since its inception in June 2019. However, its remote offshore location, attached to the complexities of being the world's first floating LNG facility, posed operational challenges. The facility has experienced intermittent outages, including a significant setback in December 2021 when a fire led to a complete power loss.

Shell's Response and Forward-Looking Approach

Shell, acknowledging the intricacies of Prelude's operation, released a statement highlighting the facility's complexity and its commitment to ensuring a safe execution of all activities. This extensive turnaround marks Prelude's first major maintenance effort, addressing not only the initially identified scopes of work but also additional areas that were revealed during the process. This forward-looking approach demonstrates Shell's dedication to the facility's long-term reliability.

Industry Insight

Insiders familiar with Prelude's operations, speaking on condition of anonymity, have indicated that the maintenance is nearing completion. One source even suggested that Prelude would restart operations as early as next week. This insider information not only adds credibility to the nearing completion but also hints at the facility's swift return to full functionality.

Prelude's Impacts on the LNG Market

Situated 475 kilometers off the west coast of Australia, Prelude holds strategic importance in the global LNG market. Its resumption of operations aligns strategically with the winter peak in demand, particularly in major markets like China and Europe. While high inventories have tempered buying in the early part of the year, the timing of Prelude's resurgence suggests a potential boost in LNG exports, contributing to the global energy landscape.

Conclusion

The resumption of exports from Prelude is a positive development for Shell. The facility is expected to generate significant cash flow for the company in the coming years. The convergence of strategic timing, innovative technology and maintenance positions Prelude as a key player in the LNG market. As the industry eagerly awaits its return to operations, the implications of Prelude's resurgence extend beyond its immediate impacts, shaping the trajectory of the LNG sector.

Zacks Rank and Key Picks

Currently, SHEL carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Liberty Energy Inc. LBRT, sporting a Zacks Rank #1 (Strong Buy) at present, and Oceaneering International, Inc. OII and USA Compression Partners, LP USAC, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Liberty Energy is valued at $3.33 billion. LBRT currently pays a dividend of 20 cents per share, or 1.01%, on an annual basis.

LBRT is a leading provider of hydraulic fracturing and other auxiliary services to North America onshore exploration and production companies.

Oceaneering International is worth $2.11 billion. In the past year, its shares have risen 44.7%.

The company provides engineered services and products, and robotic solutions to the offshore energy, defense, aerospace, manufacturing and entertainment industries worldwide.

USA Compression Partners is valued at $2.37 billion. USAC currently pays a dividend of $2.10 per unit, or 8.71%, on an annual basis.

USAC provides natural gas compression services. The company offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.

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Oceaneering International, Inc. (OII) : Free Stock Analysis Report

USA Compression Partners, LP (USAC) : Free Stock Analysis Report

Liberty Energy Inc. (LBRT) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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