Australian field share swap raises hopes for LNG supply
The prospect of yet another Australian liquefaction project was raised this week, when Shell sold a stake in an offshore gas field to Malaysia.
Shell’s Australian division, Shell Development (Australia) (SDA), signed a strategic agreement with Petronas, giving the Malaysian company a 25% stake in Australia’s NT/P48 Permit, which includes the Evans Shoal joint venture (JV) in the Timor Sea offshore Australia’s Northern Territory. Shell said the arrangement would strengthen each company’s gas asset positions in Malaysia and Australia respectively.
The agreement is subject to regulatory approvals, but if it proceeds, the new equity structure for the joint venture will be: Santos 40% (operator); Shell 25%; Petronas Carigali (Australia) 25%; and Osaka Gas 10%.
Santos will remain operator in the joint venture, but has previously said it was considering using the Evans Shoal field as a supply source for a second train at the ConocoPhillips-operated Darwin LNG plant, with a start-up date after 2013. But the field, with proved and probable reserves of 187 billion cubic metres (6.6 trillion cubic feet), has high carbon dioxide levels of around 18%, which have previously made it uneconomic to develop.
A source at the company said this week that the Evans Shoal field was still being assessed, “but it’s a complex reservoir with high CO2 .... It will be economic at some stage, but that’s still in question at the moment”.
Santos is also working on understanding the Caldita and Barossa fields, and whether there might be a blended stream that could make sense for a second train at Darwin, sometime after 2012. The Caldita and Barrosa gas discoveries nearby have not yet been fully evaluated.
Shell said the participation of Petronas was “expected to strengthen the Evans Shoal JV’s ability to take this asset forward”. Chris Gunner, c.o.o. of SDA, highlighted Petronas’ “strong LNG supply reliability and marketing credentials”.
Petronas already has interests in Australia’s domestic gas pipeline network, through the Australian Pipeline Trust and East Australian Pipeline Marketing. And Shell is a long-time player in Malaysia’s oil and gas industry, and currently operates 17 production sharing contracts, eight of which are gas acreages. Shell is also a 15% partner in Malaysia’s MLNG Dua and MLNG Tiga plants.
If the partners were to press ahead with plans for a new liquefaction plant, it would raise serious questions over Australia’s capacity to carry out so many similar projects at once. Santos announced plans for the Gladstone liquefaction project a couple of months ago, and Shell is already embroiled in ongoing efforts to get the Gorgon project off the ground. With the Pluto and Browse projects also being pushed for by Woodside, it is hard to see where the engineers and equipment would come from for yet another plant in the country.
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