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RIGZONE: Shell Australia: China LNG Demand Slips on High Prices: “China has been caught by surprise by rising liquefied natural gas prices, Royal Dutch Shell PLC.'s Australian division chairman said Wednesday.”: Posted Thursday 8 December 2005  


By Matt Chambers     


China has been caught by surprise by rising liquefied natural gas prices, Royal Dutch Shell PLC.'s (RDSB.LN) Australian division chairman said Wednesday.


"What we're seeing at the moment is how vast, dynamic changes in LNG prices have caught the Chinese off guard," Shell Australia chairman Tim Warren said at a luncheon. "We're seeing a delay in Chinese demand, but that's not to say it won't develop."


Warren said demand from other Asian markets, Australia and North America will be able to absorb production from planned LNG projects near Australia.

Shell is keen to develop the US$5 billion Sunrise LNG project in the Timor Sea as soon as possible and is "enormously encouraged" by last week's revenue-sharing pact between Australia and East Timor.


"We have been here before though," said Warren, who retires early next year. "Until we have full fiscal and regulatory certainty, we can't do anything."


The Sunrise partners, Shell, operator Woodside Petroleum Ltd. (WPL.AU), ConocoPhillips (COP) and Osaka Gas Co. (9532.TO) "are ready and willing" to look at a development decision on the project after the treaty is ratified early next year, he said.


Sunrise will compete for LNG customers with the A$11 billion-plus Gorgon field led by Chevron Corp. (CVX), along with Woodside's Pluto and Browse projects in the same region. The Woodside-operated North West Shelf project is also looking to sell gas from a planned expansion.


"I don't think there is any doubt at all Sunrise" can sell its LNG capacity, Warren said. "The faster we can commercialize our portfolio, the better."


China is determined to increase the share of gas in its energy mix, but local prices set lower than international ones are hampering the country's ability to buy gas at profitable margins, Warren said.


North American demand has been the major factor which has turned LNG into a sellers market from a buyers market, Warren said.


"If you are a seller of LNG, you want North America in your portfolio," Warren said.


Warren wouldn't be drawn on whether Shell is considering selling any of its 34% stake in Woodside, saying he was "more than happy" with the stake, given shares have doubled to a record in the past 18 months.


"You're always re-evaluating your portfolio and don't want to double-guess what you will or won't do," Warren, also a Woodside director, said when asked what would make Shell sell the stake.


Canberra rejected Shell's hostile A$10 billion takeover bid for Woodside in April 2001, citing national interest grounds.


Copyright (c) 2005 Dow Jones & Company, Inc. 


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