UPDATE: Australian Minister Expects Gladstone LNG Mergers
June 01 2009 - 12:59AM
Dow Jones News
Australia's Minister for Energy & Resources, Martin
Ferguson, Monday said he expects consolidation to occur between
liquefied natural gas plants planned for construction at Gladstone
in Queensland state.
The government Monday also said it will release six new acreage
areas for oil and gas exploration in 2009, three of which don't
contain any existing exploration permits.
There are four separate LNG plants slated for construction at
Gladstone and Royal Dutch Shell is studying the feasibility of
building a fifth. To date, the three existing large-scale ventures
have said they would be open to collaboration at the reserves or
project level.
But they haven't flagged a complete merger of their
ventures.
Ferguson, however, said he expects a shake-up soon. "I think
there's going to be a smaller number at final investment decision
time," he told reporters after an industry conference in
Darwin.
The three existing large-scale projects are being built by
U.K.-based BG Group (BG.LN) as a standalone entity, and joint
ventures between Santos Ltd. (STO.AU) and Malaysia's Petroliam
Nasional Bhd., or Petronas, and Origin Energy Ltd. (ORG.AU) and
ConocoPhillips (COP).
Ryan Lance, senior vice president of international exploration
and production at ConocoPhillips, said he expects "some natural
shuffling" to occur between projects.
"Certainly, we're looking to work with the other projects that
are there...from the upstream, the midstream and the downstream
side of the business," Lance told reporters at the conference.
Notwithstanding their huge size, a decision to merge projects in
some form could also be prompted by tough market conditions,
characterized by lower LNG demand and an expected increase in
supply.
Lance said ConocoPhillips and Origin are still aiming to make a
final investment decision on their project in 2010 but acknowledged
LNG demand has slumped considerably.
"We believe that once we come out of this economic
recession...that LNG will be a fuel for the future and a fuel of
choice," he said.
A smaller-scale project built by Liquefied Natural Gas Ltd.
(LNG.AU), supplied by Arrow Energy Ltd. (AOE.AU), is also planned
to be built at Gladstone.
On the exploration permit release, Ferguson said the six new
zones include three large deepwater areas on the northern Exmouth
Plateau offshore Western Australia state.
The other three acreage areas are in the central Great
Australian Bight offshore South Australia state in the Ceduna
Sub-basin, he said. Ferguson said that these three areas were
"truly new frontiers", because no permits are currently held
there.
Apart from the planned LNG projects at Gladstone, many others
are slated for startup in Western Australia.
Ferguson said the government is finalizing regulatory
arrangements for the carbon capture and storage element of the
Chevron Corp. (CVX)-led Gorgon project, which is aiming for a final
investment decision late this year. Ferguson said the cost of the
project has been estimated at A$30 billion to A$50 billion.
He said environmental approval for the planned Browse LNG
project, to be operated by Woodside Petroleum Ltd. (WPL.AU), is
expected in 12 to 18 months.
Ferguson also said Monday that improving Australia's retention
release system "is an area where I think we can make significant
reforms".
Currently, retention leases involve five-year reviews, but some
stake holders have expressed concerns that multinational energy
companies are holding onto, and failing to develop, gas reserves to
the detriment of the Western Australian domestic gas market, which
is undersupplied.
The minister said the current rules could lead to potential
uncertainty of tenure for fields that big oil companies may need
for LNG production.
"On the other hand, it can lead to the frustration of domestic
gas customers or LNG infrastructure owners who require gas and
believe individual fields could be commercial earlier or more
profitable if developed for other purposes," he said.
Ferguson said the government Monday will release a discussion
paper on retention leases for consultation over the next two
months.
-By Ross Kelly, Dow Jones Newswires;
61-2-8272-4692; ross.kelly@dowjones.com