01/04/2003 - 22:00

GTL fires up on Burrup

01/04/2003 - 22:00

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GTL fires up on Burrup

The GTL Resources plan to proceed with a methanol venture on the Burrup is not only notable in the face of recent hesitation by Methanex, GTL’s local rival, but also for GTL’s contrasting profile with other Burrup Peninsula “would-be”s.

GTL Resources has convinced the National Australia Bank, Bank of Scotland, and WestLB to put up debt finance for the US$400 million Liquigaz development, one for which costs have increased significantly on infrastructure and exchange rate rises.

The company trades at less than 20 pence on the London Stock Exchange’s Alternative Investment Market, and is so small almost the entire team was in Australia for recent financial closure talks.

Just two personal assistants and one executive remained in GTL’s London head office.

Seemingly far mightier outfits operating significant projects worldwide and proposing large Burrup projects under consortium arrangements, are holding back, but GTL is forging ahead with its maiden world methanol venture, on the very same peninsula.

The comparative dwarf-like GTL’s latest milestone achievement follows major project facilitation status from the Federal Government, and separate gas supply, plant construction and full-production take-off agreements.

Only one of GTL’s future neighbours is more advanced.

Burrup Fertilisers, backed by the Indian Oswal Group, has both financial closure and planning approvals from the Shire of Roebourne.

The consortium also has a long-term off-take agreement and, as with GTL, an assured gas supply from an Apache venture.

But the Oswal Group is no newcomer to its sector, already producing an annual four million tonnes of fertiliser and boasting a market capitalisation of US$750 million.

GTL’s expected Burrup rival Methanex also puts up a contrasting profile.

Methanex announced last month it was putting on ice the company’s proposed Burrup Peninsula project, its second Asia Pacific methanol plant.

The company, an experienced player with new operations and expansions underway in Trinidad and Chile, respectively, had planned to produce an annual two million tonnes of methanol, on land already allocated.

It now says it may consider starting up in smaller increments, after determ-ining "capital costs for a greenfield project of this size have become disproportionately high".

Methanex, listed on both the Toronto Stock Exchange and the Nasdaq, is reviewing its entire Asia Pacific operations and dismantling a New Zealand plant for which it lacks sufficient gas supply.

Dampier Nitrogen - a consortium with Canadian fertilizer giant Agrium and would-be local competitor to Burrup Fertilisers – has also stated there is significant capital and operating cost progress to be made before it will decide in the affirmative on a Burrup project.

Meanwhile Japan DME continues with a feasibility study for a dimethyl ether project, and gas-to-liquids expert Sasol Chevron waits in the wings, with a preferred supplier and site for a proposed synthetic diesel operation.

GTL’s push, then, appears comp-aratively optimistic and its progess could be classified as no mean feat.

One industry source who did not want to be named, described GTL’s announ-cement as "interesting".

"The entrepreneurial types are seem-ingly prospering, while those with solid sponsors, real customers and experience in operating plants are struggling to get up on the Burrup," he said.

But the £35 million-market-cap GTL can produce a project value-per-share estimate of up to 60 per cent, and is boasting an internationally street-wise team.

"Very good relationships", and people with the right range of expertise and experience – more so than any comp-arable company in the world – were the keys to the project’s progress and optimism, GTL Resources executive chairman and acting CEO Peter Middleton said in Perth last week.

Dr Middleton said the critical factor had been finance and there were no longer any "issues of significance" for the project.

Labour costs and union issues would be the responsibility of the project’s engineering and procurement con-tractor Lurgi, Dr Middleton said, but the one thing that could sink the venture was the comparative values of gas and methanol.

"But we have developed the first formula of its kind, to manage all price scenarios," he said.

Dr Middleton is a former Lloyds of London CEO, reportedly leading Lloyds from a trading loss of £8 billion to a profit of £3 billion during the period 1992-1995.

He then took on the CEO’s role at Salomon Brothers International, before moving to Nomura International as transaction director.

Diplomatic postings over almost two decades to 1985 took Dr Middleton to Jakarta, Dar-Es-Salaam and Paris, before heading up banking operations for Midland Bank International, and a five-year stint as CEO of the Thomas Cook Group.

GTL has heralded a recent new board appointment, that of David Quint, co-founder and CEO of investment banking firm RP&C International, and has staffed its Perth office with experienced offshore petroleum industry operators.

GTL manager for Australia, Michael Kendal, is an engineer with three decades of operations and senior management experience in the offshore industry with Britoil, British Gas and Shell.

Project director and civil engineer Gary Hudson has similar long-term exper-ience in the international offshore oil and gas industry, with companies including Bechtel, and Brown & Root.

GTL was formed from gold mining company BKG Resources & Bakyrchik Gold Plc, to target gas reserves that could produce between 10,000 and 25,000 barrels of liquid daily, and to develop processing systems for natural gas conversion.

The company went public in 1993.

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