Subject: AU: Talks aim to crack Timor Sea deadlock

Also: NT fears methanol deal may go West

The Australian

September 26, 2001, Wednesday

Talks aim to crack Timor Sea deadlock

Nigel Wilson * Energy writer

EAST Timor's new chief minister Mari Alkatiri has opened the way for early negotiations on Timor Sea gas developments.

Projects involving investment of more than $9 billion basically stalled while East Timor conducted popular elections.

At the time, development companies complained that the East Timorese had reneged on a promise that conditions placed on project developers would be no more onerous than those which had applied under previous treaty arrangements with Indonesia.

Mr Alkatiri told ABC Radio in Darwin -- on his first visit to Australia since the elections -- that he expected East Timor to be talking to Phillips Petroleum about its stalled $800 million pipeline from Bayu Undan to Darwin within two weeks.

"If there is goodwill we will overcome all the problems between East Timor and the companies," Mr Alkatiri said.

Phillips's Darwin manager, Jim Godlove, said last night that no discussions had been scheduled but he said that the company was happy to talk to the independent East Timor authorities at any time.

The election effectively allowed a cooling off period to develop.

The developers had tried to secure commitments from East Timor on matters of taxation, fiscal regime and legal certainty to their ownership reserves.

Equally, the East Timorese were concerned that most of the benefits of the Timor Sea developments -- other than revenue -- were going to Australia.

Lack of progress on these issues were blamed for Phillips and its Bayu Undan postponing "indefinitely" an investment decision on a 36-inch pipeline from Bayu Undan 550km to Darwin.

This pipeline had been regarded as essential for Timor Sea developers to meet their promise of supplying LNG to world markets as well as bringing large volumes of gas onshore to meet eastern states' market demands emerging in the second half of this decade.

Mr Godlove declined to comment on whether the possible resumption of talks would lead to an early resolution of the matters in dispute.

But he did repeat that US energy utility El Paso needed to be reassured about the security of gas reserves before it would commit to a deal before the end of the year for the Timor Sea to supply up to 5 million tonnes of LNG a year from a plant based in Darwin.


The Australian September 26, 2001, Wednesday

NT fears methanol deal may go West

Nigel Wilson * Energy writer

THE world's biggest methanol producer, Methanex Corporation of Canada, is negotiating with the North West Shelf gas project to use WA's Burrup Peninsula as an alternative to Darwin as the site for a world scale plant.

The move reflects Methanex's frustrations with negotiations between Australia and East Timor over the taxation and fiscal regime for Timor Sea gas developments.

It also throws into doubt the plan for the Woodside, Shell and Phillips Petroleum-owned Sunrise gas reservoir to supply natural gas to customers in northern Australia, including the Northern Territory's Power and Water Authority.

Methanex is the foundation customer for the Sunrise gas project and has a letter of intent to take up to 110 terajoules of gas a day in Darwin from 2005.

It had planned to supply up to 3 million tonnes of methanol a year to Asia Pacific markets worth more than $750 million from the Darwin plant.

Methanex's Asia Pacific senior vice-president, Bruce Aitken, said from Canada last night Darwin had always been the company's base case for plant serving the Asia Pacific.

"Because of the issues that exist in the Timor Sea we have been forced to look at alternatives," Mr Aitken said.

"We are hoping to make a decision before the end of October," he said.

While he would not disclose where Methanex was considering locating the new plant, it is understood that negotiations have begun with the North West Shelf joint venture.

A venture spokesman said last night: "We have a policy of not commenting on commercial negotiations."

Abandoning Darwin would be a major blow for the Northern Territory as the methanol plant was seen as a building block for substantial investment in added value gas processing developments.

It also changes the dynamics of Timor Sea gas developments dramatically.

The Methanex LOI was not on its own sufficient justification to develop the fields and pipe the gas to Darwin but it provided the chance of smaller contracts with such organisations as PAWA and Nabalco to be aggregated to produce a commercial return.

Without a Methanex contract there would not be sufficient domestic demand to justify pipeline construction and Sunrise would then revert to being an LNG prospect.

This means there is little likelihood of Shell being dissuaded from developing a floating LNG project on the Sunrise reserves.

It also means there is another hurdle for the Phillips/El Paso LNG project based at Darwin to overcome.


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