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in the zeolite until they are needed, and through microbial action, improving the health of soils.

With the titanic struggle between Woodside and Shell over, Susan Bowers investigates the intricate links between LNG players off Australian shores.

THE Timor Sea oil and gas fields are seen as the key to further natural gas and LNG market supply, not only to increasing Australian markets but also the US and Asia.

Development of the Evans Shoal, Greater Sunrise and Bayu-Undan fields is expected to significantly increase the competition for domestic gas supply.

Stakes and timetables are changing considerably, starting in February this year, when Woodside, Phillips and Shell agreed to coordinate the development of the three competing gas projects in the Timor Sea.

Through one of the deals Woodside has become the operator and Phillips has taken on the LNG marketing role for the Greater Sunrise fields, in which Shell and North West Shelf customer and Japanese utility Osaka Gas, also have interests.

When Phillips secured a letter of intent to supply an annual 4.8 million tonnes of Greater Sunrise LNG to El Paso for the next 20 years, the multinational ensured a strategic regional foothold.

Other gas from the project will supply a proposed Phillips-Epic Energy natural gas pipeline from Darwin to South Australia.

Hence, while Phillips, Shell and Woodside also agreed to share offshore pipeline infrastructure, reducing Greater Sunrise and Bayu-Undan development costs, the Greater Sunrise and the Phillips-operated Bayu-Undan projects will compete in the domestic market.

If Phillips fully acquires Australian explorer and producer Petroz, which has an 8.25 per cent stake in Bayu-Undan, Woodside has the option of acquiring 5 per cent of the project, its first interest in the venture.

With a major interest in the development and success of both the Greater Sunrise and Bayu-Undan ventures, Phillips almost came to hold a considerable stake in the other major Timor Sea project, Evans Shoal, this year.

But developments will deny Phillips this coup and may now give a much smaller player an interest in two of the major ventures.

Earlier this year, Shell offered 25 per cent of its stake in the potentially lucrative Evans Shoal gas field to Phillips and a mid-year option for the same amount to Woodside. However Natural Gas Australia exercised its right to pre-empt the Phillips offer and is purchasing that stake, increasing its holding to 40 per cent.

Enterprising South Australian-based company, Santos, an 11.8 per stakeholder in Bayu-Undan, has now grabbed this interest, through a purchasing finance deal and scheme of arrangement acquisition with Natural Gas Australia.

This now means Shell, Woodside and Osaka each have interests in Greater Sunrise and Evans Shoal, while Phillips holds interests in both Bayu-Undan and Greater Sunrise and Santos in Bayu-Undan and Evans Shoal.

The development of the Evans Shoal venture is subject to LNG sales to Asian markets, with the gas envisaged to be processed at the Darwin plant where Phillips hopes to install its technology.

However, the project is also seeking to supply markets in Darwin, Gore and South Australia, and hence will compete both domestically and internationally with gas from the Greater Sunrise and Bayu-Undan fields.

Santos, touted as Australia’s major Australian onshore oil and gas explorer and producer, put up its hand in March this year with an alternative proposal to Shell’s bid for a controlling interest in Woodside.

At the time, Woodside announced none of the alternative discussions might progress to become an acceptable proposition.

However, with an Australian conglomerate of oil and gas interests potentially worth $50 billion and hence a difficult target for foreign enterprise, Woodside has reportedly maintained discussions with both North West Shelf partner BHP, and Santos.

Woodside and Santos both have gas interests in the Bass Strait and compete for eastern states gas markets.

Holding oil and gas interests in SE Asia, PNG and the US, four significant Australian gas discoveries in the past two months, a 15 per cent shareholder cap expected to be lifted this month, and record production and profit in 2000, Santos and its proposal may prove attractive.

And with Santos a possible takeover target once the ownership cap is removed, Woodside, Santos and BHP would want to discuss merging or transferring oil and gas interests.

With the results of territory and revenue-sharing talks between the East Timor Transitional Administration and Australia set to influence regional investment and timetable decisions by the major players, the next few months could be both fascinating and definitive to the development of Australia’s northern regions.

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