Times (UK)

June 21, 2003

Wrangles beset development of gasfield By Carl Mortished

GAS, rather than oil, is the big prize in the Timor Sea, and that causes problems.

Unlike oil, gas needs a ready market and Timor Sea gas is 500 km from the nearest landfall. ConocoPhillips has awarded a $1 billion construction contract to Bechtel to build a liquefaction plant in Darwin that would chill gas piped from the Bayu-Undan for transport in liquid form (LNG) to Japan. The deal is possible because Tokyo Gas and Tokyo Electric Power have bought the entire 17-year output of the the Bayu-Undan field. The first phase of Bayu-Undan is an oil development, but the 3,400 billion cubic feet of gas needed a pipeline, a liquefaction plant and buyers to proceed.

Greater Sunrise, the gasfield much coveted by East Timor, is larger, almost 9,000 billion cubic feet, but development of the field is beset by disputes between the partners over technology and the main issue is likely to be finding buyers for the gas. LNG is a growing but increasingly volatile market. Over the past year Japan has been snapping up supplies, responding to an energy shortage created by the shutdown of its nuclear plants. However, a number of large new gasfields are looking for long-term buyers. BP is seeking buyers for its Tangguh project in the Indonesian province of West Papua and Shell is marketing gas from Sakhalin in Eastern Sibera. Petronas, the Malaysian state oil company, is building the third phase of the largest LNG plant in the world in Sarawak; the gas has not been sold in advance and the fourth phase of Australia’s vast North West Shelf LNG scheme is on stream next year.

Analysts fear there may be a lot of LNG tankers looking for a friendly port in five years’ time. The Greater Sunrise partners, Woodside Petroleum and Shell, spent $200 million (£119 million) engineering a solution to the problem of getting the gas to market, agreeing that the cheapest option, costing $3 billlion, would be a floating LNG facility, a purpose-built barge half a kilometre in length that would carry a plant to freeze the gas and store it mid-ocean instead of piping it 500 km to shore.

In 2001, Shell said confidently that Greater Sunrise gas would be exported to California, but the Anglo-Dutch firm now seems to have earmarked Sakhalin gas for the US. ConocoPhillips, which has a share of Greater Sunrise, had hoped to link Greater Sunrise to its Bayu-Undan LNG plant; the Americans are not convinced that the floating LNG scheme is the best option.

http://www.timesonline.co.uk/

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