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West coast feel in Timor Sea deal

INDUSTRY players insist the main barrier to achieving agreement on the Greater Sunrise project in the Timor Sea has very little to do with Australia and a great deal to do with the opportune North American west coast market, sizeable, established and needy.

However, part of Phillips Petroleum’s hesitancy in agreeing to Shell’s floating liquefied natural gas development proposal for the Sunrise fields is that the floating LNG concept remains unproven in a commercial operation.

The concept came out of Shell’s GameChanger think-tank just five years ago.

GameChanger was established in 1996 to collect and investigate innovative and novel ideas that would give Shell International Exploration and Production the leading edge in the oil and gas arena.

Shell was looking for ‘breakthrough’ ideas and knew none of these remained secrets for long in an R & D industry continually touting concepts to potential commercial backers worldwide.

Liquefied natural gas production is capital and technologically intensive and the idea presented to GameChanger just one year after it was established moved quickly to a peer review in 1998 and field studies by 1999. An FLNG design for offshore Namibia is six months ahead of Sunrise.

The idea brings together the traditional floating production storage and offloading facility and LNG processing, presenting safety challenges, but offering the potential to monetise gas in places like the Timor Sea and off West Africa that Shell says could otherwise remain stranded for up to 20 years.

The North American west coast factor in the Timor Sea struggle may not be as simple a battle as it seems.

Phillips Petroleum and Shell are two of a half dozen large companies fighting for supremacy there, and quantity and economy from Sunrise FLNG production and processing would give Shell both a speedy and long-term edge.

ExxonMobil is soon to rationalise its merged assets and this, coupled with Santa Fe Snyder’s arrival on the potentially lucrative Australian scene, is also adding to the tension, some say.

Although Phillips holds a greater stake (30 per cent) in the Sunrise upstream joint venture than Shell (26.56 per cent), it is holding out against Shell’s proposal to produce LNG offshore.

Shell would hold 51 per cent ownership of the floating facility, and would have operator status there, while Phillips would have to share the remaining 49 per cent with the other venture parties.

Woodside, operator for the Sunrise joint venture which includes Osaka Gas (10 per cent) and Phillips, approves the FLNG proposal, and says $A200 million has been spent on looking at all possible options to underpin development.

Woodside and Shell say there is no Australian market large enough to underpin economical development. The total eastern Australian domestic and light industrial market demands 1400 terajoules per day, but a feasible Sunrise would require a long-term market of at least 900 terajoules daily.

In comparison, production from the North West Shelf venture is averaging 540 terajoules per day.

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