12/09/2006 - 22:00

LNG projects hit new scale of development

12/09/2006 - 22:00

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The liquefied natural gas (LNG) industry stands to become the most significant part of the resources sector if projects proposed for waters off the coast of Western Australia come to fruition.

LNG projects hit new scale of development

The liquefied natural gas (LNG) industry stands to become the most significant part of the resources sector if projects proposed for waters off the coast of Western Australia come to fruition.

Five giant LNG projects currently under consideration would require a total investment of about $45 billion, dwarfing the combined amount currently being invested in the entire mining industry.

The five projects would have annual LNG output of 42 million tonnes, nearly three times the planned output of the North West Shelf venture, which is currently Australia’s single biggest resource project.

The most advanced LNG projects are Woodside’s Pluto project and Chevron’s Gorgon project.

Woodside chief executive Don Voelte is pursuing an aggressive development strategy for the wholly-owned Pluto project, which is expected to produce between 5mt and 6mt of LNG per year.

The Pluto gas field was discovered only last year, yet Woodside is planning to make a final investment decision in 2007 and is targeting first LNG in 2010.

Mr Voelte said this would be an industry record pace.

Woodside, like most other project proponents, has not released a precise costing of Pluto, but the ballpark estimate is about $5 billion.

In contrast to Pluto’s rapid trajectory, Chevron’s Gorgon project has spent many years in the assessment phase and is currently awaiting a state government decision on environmental approval.

The project has been contentious because Chevron is proposing to build the 10mtpa LNG plant on Barrow Island, an A-class nature reserve.

Chevron has been producing oil on Barrow for many years and believes the LNG plant can co-exist with the island’s conservation values.

Premier Alan Carpenter has pledged that the state government will work with Chevron to progress the project.

Apart from regulatory hurdles, Gorgon would also have been affected by the sharp cost increases facing all projects.

The official $11 billion cost estimate is three years old and is expected to increase to at least $15 billion.

Woodside is hoping to follow its Pluto project with development of the much larger Browse Basin gas fields, located 400 kilometres off the coast of Broome.

Mr Voelte has stated that he wants Browse in production by 2012, before competing projects in countries such as Qatar kick in.

The project is estimated to cost about $8 billion and will have annual LNG output of up to 14mt.

Other big projects on the drawing boards are BHP Billiton’s Pilbara LNG proposal, and Japanese company Inpex’s Ichthys project.

Both projects would produce 6mtpa of LNG.

The BHP project is in the pre-feasibility phase and would involve the construction of an LNG plant on the coast near Onslow.

The LNG plant would process gas from the Scarborough field, jointly owned by BHP and ExxonMobil.

There have been two notable developments affecting the Ichthys project in the past month.

The federal government granted major project facilitation status to help it through the approvals process, and French oil company Total acquired a 24 per cent stake.

One area of uncertainty for LNG projects is the state government’s plan to reserve up to 20 per cent of gas for the domestic market.

The general view in industry is that a compromise will be negotiated and projects will not be threatened by this policy.

As well as the new LNG projects, the waters off WA’s northern coast could also be home to several oil projects.

Coogee Resources, which is considering an ASX float, is aiming to start development of its Montara oil field in the Timor Sea by the end of this year, while BHP is assessing the possible development of its Pyrenees oil field.

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