News: Timor-Australia cut deal on Sunrise gas:
"Chevron has 50 percent of Gorgon, while Shell
and ExxonMobil own a quarter each. Shell has
said its share of the production will go to
Sempra’s Baja California terminal.": Saturday 10
Woodside appears to be
pushing ahead with new Pluto field instead,
until questions about Timor Sea border issues
News Contributing Writer
Negotiators for Australia and East Timor
apparently have come up with a formula for
sharing cash flow from the giant Greater Sunrise
gas field that sits in the Timor Sea between the
two nations. But Sunrise operator Woodside
Petroleum Ltd. appears to be concentrating
instead on its 100 percent owned Pluto
discovery, which doesn’t carry international
boundary complexities or partner issues.
Australian Foreign Minister Alexander
Downer told his country’s parliament Dec. 1 that
the two governments reached a tentative
agreement on splitting the billions of dollars
in royalties expected from Sunrise development.
If it goes through as envisioned, East
Timor could receive $14 billion over 20 years.
The country, with just three quarters of a
million residents, was devastated by its long
war for independence from Indonesia.
But the development agreement reportedly
has some ticklish provisions, and it might well
be rejected by East Timor’s legislators. Until
the formal signoff by both countries,
Australia’s Woodside is unlikely to make any
moves at all.
Perth-based Woodside, a third of which is
owned by Shell, put Sunrise on hold last year
because of the border controversy. Still,
Sunrise is a rich deposit, expected to yield
something like $40 billion in natural gas and
Woodside said it welcomed the government
announcement but hadn’t yet seen the contents of
the agreement between the two countries.
“The future of the Sunrise gas project
remains dependent on several factors, including
the fiscal regime under which it would operate,
the cost and location of any development and the
successful marketing of the resource,” the
Pluto LNG agreement
Meanwhile, Woodside said Dec. 1 it has North
Asian buyers for 3.5 million to 4 million tonnes
of LNG annually from Pluto, which was discovered
just last April.
The sales number is more than half of the
project’s initial capacity of 5 million to 7
million tonnes. The sales would be worth
somewhere around $11 billion over their 15-year
terms, and there’s a five-year extension option
as well. A million tonnes of liquefied natural
gas converts into roughly 48 billion cubic feet
of natural gas.
Heads of agreements are due for signature
over the next few months and firm purchase
agreements by the end of 2006, Woodside said,
with a final investment decision in 2007.
In addition to its Asian customers,
Woodside says discussions are progressing with
potential U.S. customers for additional LNG from
Pluto, which sits about 120 miles off Western
Australia. China, which backed away from a major
commitment for Gorgon LNG, doesn’t appear to be
a factor in this deal.
For Woodside, the 100 percent owned Pluto
deposit could be a major plum, and the company
already has plenty of technical credibility from
its successful operation of the one-sixth-owned
North West Shelf venture, which is nearby. Pluto
shipments would start in 2010 under the
company’s current swift timetable.
As for Sunrise, Woodside owns 33.4 percent
and will have to share production there with
ConocoPhillips (30 percent), Shell (26.6
percent) and Japan’s Osaka Gas Co. (10 percent).
Sunrise is expected to cost about $5
billion to develop, compared with about $4
billion for Pluto.
Another Gorgon sale?
Chevron Corp. was reportedly nearing an
agreement with Japan’s Osaka Gas Co, for LNG
from the Greater Gorgon project, according to
reports from Dow Jones and Reuters.
The deal is said to involve 1 million to
1.5 million tonnes of LNG annually for 20 to 25
years starting in 2010.
That builds on major recent Gorgon sales
to two other Japanese utilities, Tokyo Gas Co.
and Chubu Electric Power Co. Those sales volumes
are 1.2 million and 1.5 million tonnes for
25-year terms. All three Japanese companies are
reportedly considering equity stakes in Gorgon.
Earlier plans for China’s CNOOC to take
Gorgon LNG appear to be moving off the stage.
The Chinese firm backed away from its tentative
deal with Chevron over the higher prices that
Asian gas is now commanding.
Chevron has 50 percent of Gorgon, while
Shell and ExxonMobil own a quarter each. Shell
has said its share of the production will go to
Sempra’s Baja California terminal. Exxon’s isn’t
Still, the lack of contracted supply and
the long-term deals for Australian LNG call into
question whether China will continue its
aggressive plans to build more than a dozen LNG
terminals along its coastline and boost its use
of the fuel dramatically.