THE WALL STREET JOURNAL: Australian LNG Exports Could Grow Sharply – Govt: “Shell said Monday that under a 20-year deal, it has committed to take up to 2.5 million tons/year from Gorgon for Sempra's Energia Costa Azul terminal in Baja California, starting from 2010. Shell has rights to 50% capacity of the terminal, construction of which began early this year.” (ShellNews.net) 13 April 05

DOW JONES NEWSWIRES

April 13, 2005

CANBERRA -- Exports of liquefied natural gas from Australia could grow sharply in the coming years to new markets expected in South Korea, China, Mexico and California, according to the government's annual trade statement issued Wednesday.

Australia's existing capacity to supply LNG stands at 11.7 million metric tons a year, all from the North West Shelf project, and most destined for Japan and some to South Korea.

But this will grow when a fifth train at the North West Shelf comes onstream, adding 4.2 million tons/year, with a final investment decision on this expected midyear.

An LNG plant in northern Darwin city to be operated by majority owner Conoco Phillips (COP) is under construction and is expected to supply 3.5 million tons/year from 2006, the statement said.

Other projects are also being developed, including the well-advanced Gorgon, near North West Shelf, and Browse, Sunrise, Tassie Shoals and Scarborough, though most are well short of a formal start and will depend on securing some long-term supply contracts, it said.

These projects are based on known offshore gas resources dotted around Australia's Northwest coast or in the Timor Sea.

Gorgon hopes to commit to a front-end engineering and design, or FEED, phase, by midyear, leading to a final investment decision in mid-2006. It is due to ship its first LNG by late 2009.

The trade statement said Australia faces strong competition for LNG supply contracts from suppliers in Indonesia, the Russian Federation and the Middle East.

"The government will continue to assist producers," it said.

World consumption of LNG grew sharply in 2004, underpinned by robust economic growth and additional gas-fired electricity generating capacity in North Asia, it said.

As a result, there are "exciting prospects for new markets, with strong demand expected from China, Korea and North America," the statement said.

   More Chinese Import Terminals Planned

Additional import terminals are planned on China's east coast by the end of the decade, building on planned imports to China's new Guangdong terminal of 3.3 million tons/year from North West Shelf in 2006, it said.

"Australia's Gorgon project is well-advanced in negotiations to supply LNG to the planned Zhejiang terminal," the statement said.

South Korea is the second largest LNG importer after Japan, with demand expected to increase 5% a year until 2015, it said.

"Australian suppliers are well-positioned to meet part of this burgeoning demand through future long-term contracts," it said.

Royal Dutch/Shell Group (RD) and Sempra Energy (SRE) have received final approval to build an import terminal on Mexico's west coast, it said.

Indeed, Shell said Monday that under a 20-year deal, it has committed to take up to 2.5 million tons/year from Gorgon for Sempra's Energia Costa Azul terminal in Baja California, starting from 2010.

Shell has rights to 50% capacity of the terminal, construction of which began early this year.

ChevronTexaco Corp. (CVX) also has received Mexico's approval for building an import terminal on its west coast and is planning to source LNG from Gorgon, the trade statement said.

ChevronTexaco owns half and is operator of Gorgon, with Shell and ExxonMobil Corp. (XOM) each having a 25% stake.

In California, North West Shelf operator Woodside Petroleum Ltd. (WPL.AU) has announced it will operate Crystal Energy's proposed import terminal, the trade statement said.

BHP Billiton Ltd. (BHP) meanwhile is waiting for final approval for building an import terminal off the Californian coast.

The trade statement said if successful, both these California terminals plan to import LNG from Australia.

The North West Shelf LNG project is owned by Woodside, Shell , BHP Billiton, ChevronTexaco, BP PLC (BP) and Japan Australia LNG, an equal joint venture between Japan's Mitsubishi Corp. (8058.TO) and Mitsui & Co. (8031.TO).

-By Ray Brindal, Dow Jones Newswires, 612 6208 0902; ray.brindal@dowjones.com 

-Edited by George Bernard

Click here for ShellNews.net HOME PAGE