20/12/2005 - 21:00

Japanese move in on NW gas

20/12/2005 - 21:00

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Despite the hype about China, Japan has emerged as a favoured market for new North West gas following four recent long-term contracts related to fresh developments off the Pilbara coast.

Japanese move in on NW gas

Despite the hype about China, Japan has emerged as a favoured market for new North West gas following four recent long-term contracts related to fresh developments off the Pilbara coast.

Last week, Woodside Energy Ltd signed up Tokyo Gas Co Ltd for up to 1.75 million tonnes of LNG a year from its Pluto development, while Chevron Australia announced a 25-year deal with Osaka Gas for 1.5mt/year from the Gorgon project at Barrow Island.

In November, Chevron Australia agreed to sell 1.5mt/year to Japanese group Chubu Electric and 1.2mt/year to major Japanese utility Tokyo Gas over 25 years from 2010.

Following the deals, Chevron announced the sale of nearly all its share of gas from the first phase of the $11 billion Gorgon gas project off WA’s North West coast, worth about $30 billion over 25 years from 2010.

These deals with Japanese buyers are in contrast with China’s lack of buying in the WA LNG market.

Last month, Chevron Australia announced the preliminary heads of agreement with China National Offshore Oil Corporation had fallen through due to unresolved pricing and timing issues.

This preliminary agreement, signed in October 2003, was for CNOOC to buy $30 billion (or 100 million tons of LNG) in 25 years from the Gorgon project along with a 12.5 per cent stake in Australia’s biggest untapped gas deposit.

Chevron Gorgon venture marketing manager Neil Theobald said the original deal had become unfeasible due to significant differences between the two parties on price and that the three owners were now marketing independently of each other.

“We’ve stopped the current negotiations as a joint venture,” he said. “Any future engagement with China will be on a company-to-company basis.”

Mr Theobald said China was still regarded as an important market for Gorgon gas, however the reduction in uncommitted gas could result in China missing out.

This would be unwelcome news to CNOCC vice-president Wu Zhenfang, who said at the 2005 China Gas Summit that the prospects of CNOOC importing LNG from the Chevron-lead Gorgon project were still good.

Chevron Australia has a 50 per cent operating interest in the Gorgon project, with other participants including the Australian subsidiaries of Shell and ExxonMobil, each of which hold 25 per cent.

The Woodside deal with Tokyo Gas provides for the supply of LNG for 15 years with an option to extend for a further five years, with deliveries starting from the end of 2010. Under the heads of agreement, Tokyo Gas will be able to purchase a 5 per cent equity interest in the Pluto project.

Woodside’s CEO Don Voelte said Woodside had a long relationship with Tokyo Gas in the supply of LNG and looked forward to extending their relationship with the Pluto project.

“We are delighted to have signed this agreement with one of the world’s most established LNG customers,” he said.

Woodside Pluto LNG director Lucio Della Martina said other heads of agreements would be signed in the New Year with North Asian customers but did not comment on who they would include.

 

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