East Timor buys into Sunrise project

The government of East Timor has struck a deal to buy a 30 per cent stake in the Woodside Petroleum-operated Sunrise gas project, as it continues pressing for development of an LNG plant on its own territory.

The government has agreed to pay US company ConocoPhillips $US350 million ($A480 million) for its stake in the long-delayed project.

In a joint statement, they said this amount recovered the costs incurred by ConocoPhillips in connection with the Greater Sunrise fields.

The government restated its preference for developing the fields through a pipeline to Beaco on the country’s south coast.

Woodside and other joint venturers have previously argued a better option was to pipe the gas to an LNG plant at Darwin.

ConocoPhillips’ Australia-West president Chris Wilson said the decision to sell the interest followed an approach from the government.

“We respect the Timor-Leste government’s preference to develop the Sunrise fields through a new greenfield, Timor-Leste based LNG facility,” he said.

“While we differ on the proposed economic development option, we recognise the importance of Sunrise to the nation of Timor-Leste and hope the sale of our interest to the government allows them to progress their vision for the development of Sunrise.”

Woodside noted today that the existing joint venture participants had a right to match the government’s offer.

“The joint venture participants hold certain rights that may or may not be exercised in such circumstances,” Woodside stated.

“Woodside and the Sunrise joint venture remain committed to the development of Greater Sunrise and we look forward to working with Timor-Leste to deliver value to both the people of Timor-Leste and the shareholders of the joint venture participants,” it added

Wood Mackenzie’s analyst David Low said the government was likely to get its way on future development.

“We believe the likely forward plan to monetise Sunrise is now through an onshore LNG development in Timor-Leste,” Mr Low said.

This would require construction of a new liquefaction plant and associated infrastructure, an FPSO vessel to process and handle the condensate and construction of a pipeline connecting the FPSO to shore.

“Timor-Leste authorities are determined to harness the economics benefits of an onshore development,” Mr Low said.

“The Timor-Leste government is also pursuing the development of Sunrise to replace declining revenues from the mature Bayu Undan field.”

Mr Low said the key risk was the construction of a greenfield LNG project in a country that had historically lacked large-scale infrastructure projects.

“The next step is for the project to put forward a viable development plan that all the project participants would be willing and happy to commit too,” he said.

The government’s purchase of ConocoPhillips’ interest is conditional on receiving funding and regulatory approvals.

The government was advised by PwC and Miranda & Associados and ConocoPhillips was advised by Herbert Smith Freehills.

The Sunrise and Troubadour gas and condensate fields, collectively known as the Greater Sunrise fields, are located approximately 150 kilometres south-east of East Timor and 450km north-west of Darwin.

The current Sunrise joint venture partners are Woodside (operator) with a 33.4 per cent interest, ConocoPhillips (30 per cent), Shell (26.6 per cent) and Osaka Gas (10 per cent).

Canada LNG

The news on Sunrise coincided with yesterday’s announcement that Shell, Petronas and their partners have sanctioned development of the LNG Canada project, at a likely cost approaching $40 billion.

Wood Mackenzie said this was the first greenfield LNG export project globally to reach a final investment decision (FID) in five years.

“It seems that mega-projects are back,” Wood Mackenzie commented.

The consultancy added LNG Canada was also a signal of growing confidence in the LNG market.

“The momentum behind LNG Canada reflects the drastic improvement in the LNG market over the past 12 months, driven by buoyant demand in China.

“A clutch of projects are vying for FID, including four mega trains in Qatar, Arctic LNG-2 in Russia, at least one development in Mozambique and several US projects.

“We believe 2019 could be the busiest year of LNG FIDs ever.”

As well as the projects listed above, Woodside and Chevron are eyeing new developments offshore WA, though primarily new gas fields to feed existing LNG plants.