Month in Petroleum: October 2009 – LNG

DRAMA was the order of the day for the liquefied natural gas sector in October with several notable events on both sides of the continent and across the sea in Papua New Guinea.

Wheatstone scores one over Pluto

Notable amid the LNG news was the announcement from Apache and Kufpec Australia that they would abandon talks with Woodside Petroleum to commercialise their gas through the Pluto LNG project in favour of Chevron’s Wheatstone project.

The move is a boon to Chevron’s plan to leverage Wheatstone as a hub for third-party gas owners to commercialise the otherwise uncommercial reserves and a blow to Woodside’s similar plans.

PNN columnist the Slugcatcher was quick to question Woodside’s “Build it and they will come” strategy, while an industry watcher said it indicated just how bad a deal Woodside was offering.

Both Apache and Kufpec will take up a 16.25% and 8.75% equity stake in the Wheatstone facilities respectively.

Apache also hinted that future exploration success in the area could also be commercialised through Wheatstone, giving it a larger stake in the project.

Woodside maintains a brave front, on track with Pluto

Woodside, quite predictably, put on a brave front in light of the setback, saying it was still in talks with other third-party gas owners in the Carnarvon Basin.

Some reports have suggested that Hess, which is an equal partner with Woodside in WA-404-P, could be the most likely partner. In July, Hess said it was in supply talks with Woodside.

Woodside is also banking on making gas discoveries with its 20-well drilling program in the Greater Pluto area.

Meanwhile, the company said in its September quarterly report that Pluto LNG had reached 78% completion and remained on schedule for first gas by the end of 2010 and first LNG in early 2011.

The major expects to award the front-end engineering and design contract for the second Pluto train this month with a final investment decision in late 2010.

Woodside also touched on its other LNG projects saying it continued to progress towards an FID for Browse LNG in early 2011, while saying it was still working on the floating LNG and Darwin LNG concepts for Sunrise and could make a development decision this quarter.

Shell flying the flag for LNG

Turning over to FLNG developments, Shell has committed to using the technology to develop its Prelude and Concerto fields off Western Australia with first gas starting as early as 2016.

Shell executive director Upstream International Malcolm Brinded said the company had been working on FLNG for a long time and was confident of moving onto other possible FLNG projects in the near future.

He added that this would be helped by its “design one, build many” strategy which could see it moving ahead with several developments in the next few years.

FEED work for the planned 600,000-tonne vessel capable of producing 3.5 million tonnes of LNG per annum is being carried out by Technip and Samsung as part of their master agreement for the design, construction and installation of multiple FLNG facilities over 15 years.

Shell added that development drilling for Prelude was expected to start in 2013 and take about two years, while vessel installation and hook-up is expected to take about six months with commissioning in 2015.

It also noted that an FLNG plant would have a lower environmental footprint and result in less carbon dioxide emissions.

Thai FLNG plan falling into place

Meanwhile, Thailand national upstream oil company PTTEP is believed to be a step closer towards using FLNG to develop its gas reserves in the Timor Sea after it bought AC/P33, which holds the Oliver oil field, from Stuart Petroleum and the Albers Group.

The Northern Territory has estimated that the field holds reserves of about 21.4 million barrels of oil and 310 billion cubic feet of gas.

AC/P33 is also just 40km from the PTTEP-operated Jabiru and Challis fields as well as the Audacious and Tenacious fields that the Thai company acquired from OMV earlier this year.

PTTEP chief executive officer Anon Sirisaengtaksin confirmed this when he said the investment was part of the company’s plan to seek opportunities in target areas and speed up development through the use of FLNG.

Talisman downplays FLNG, flags PNG expansion plans

While FLNG is getting Shell’s attention, Talisman Energy has said plans to use FLNG to develop its assets in Papua New Guinea have become less attractive.

Taliaman exploration and sub-surface manager in Port Moresby Bob Bannar said that while Talisman had until just over a year ago sought an exit from PNG, the poor offers received for the Pandora field led the company to settle on an “aggregation strategy” instead.

The Canadian major has since than acquired Rift Oil and farmed into both Horizon Oil and New Guinea Energy’s permits, giving the company higher reserves or access to potential resources it did not have previously.

Bannar said Talisman’s total resource at Pandora and the Foreland Basin possibly amounted to around 2 trillion cubic feet with drillable targets likely to increase the resource potential to 4-5tcf in 4-5 years.

The company is now leaning towards either building a LNG facility or joining ExxonMobil or InterOil, though it is also looking at the alternative of building a gas-to-liquids facility.

PNG LNG bill hits $US15 billion

Still in PNG, Oil Search revealed that the partners in the ExxonMobil-led PNG LNG joint venture might be in for a small case of sticker shock after noting the operator had estimated total capital costs to be about $US15 billion ($A16.2 billion).

This is up from pre-FEED estimates of about $US1.5 billion, though the old estimate had not included pre start-up operating costs of about $US600 million.

However, it also noted FEED work had resulted in increased capacity for the plant from 6.3MMtpa to 6.6MMtpa due to an increase in fuel efficiency.

Oil Search has also rapidly raised $895 million through an oversubscribed institutional placement it had put in place after the termination of the deal to sell a stake in its share of the PNG LNG project to International Petroleum Investment Corporation.

BG picks up pace for QCLNG

Over in Queensland, BG Group has made good progress on its Queensland Curtis LNG project having drilled more than 150 wells this year with tendering underway for the pipeline material and construction contracts.

FEED for both the upstream facilities and LNG plant are also progressing to plan.

FID for QCLNG, which will use coal seam gas as feedstock to produce 7.5MMtpa of LNG, is expected next year.

Tuesday, 10 November 2009
PNN

Norwest expects windfall from Puffin stake

NORWEST Energy is set to benefit from its minority stake in the Puffin project after AED Oil announced development plans for the project in the Timor Sea.

In a company presentation last week, AED Oil said it had upgraded reserves at the project and was considering a number of development options that would see production resume within 18-24 months.

Production from the Puffin field has been suspended since May after Sinopec and AED terminated Sea Production’s charter contract for the use of the Front Puffin floating production, storage and offtake vessel for alleged breaches related to occupational health, safety and the environment.

Norwest chief executive officer Peter Munachen said that while the company would have preferred an earlier resumption of production, the announcement was good news for Norwest.

“We see AED’s plans for Puffin as a positive for Norwest from a longer-term perspective,” he said.

“Given its current NPV [net present value] of $15 million, our royalty interest is an asset that other junior exploration companies would like to have in their portfolios, particularly given its blue sky.

“It has no carrying cost to us, so we will sit patiently and watch as the Puffin JV implements its development and exploration strategies to unlock the project’s potential and adding value for Norwest.”

According to the presentation, the leads and prospects identified in AC/P22 and AC/L6, which contains the Puffin field, have unrisked oil in place of more than 700 million barrels, while P50 reserves at Puffin are estimated at 20.93MMbbl.

AED is considering a number of development options to realise maximum value from its assets including moveable jack-up drilling, production and storage unit, a floating production, storage and offtake vessel, or fixed platform production system.

Norwest has a 1.25% overriding royalty in the Puffin field.

PNN
Tuesday, 10 November 2009

Ichthys FEED to delay FID, production still on track

INPEX says the complexity of the front-end engineering and design for its Ichthys liquefied natural gas project in Darwin will result in the company pushing back its final investment decision to late 2010 or early 2011.

However, Ichthys is still expected to start producing LNG in 2015, Northern Territory Chief Minister Paul Henderson told ABC Radio.

“There's going to be slippage in some parts of the project; there'll be acceleration in other parts.”

The Japanese major was originally expecting to make a FID late this year or early 2010.

Inpex president Naoki Kuroda said the decision would not be made until after the front-end engineering and design was completed for the $12 billion plant in Blaydin Point, Darwin, adding it was not due to a lack of finance.

“We have no change of policy about building our LNG plant in Darwin. Of course we can make up for lost time.”

The Ichthys LNG project includes plans for what could be the world’s largest floating processing platform, capable of stripping out 100,000 barrels of condensate per day, as well as a subsea pipeline of up to 930 kilometres long to the onshore LNG plant at Blaydin Point in Darwin.

Ichthys will have an initial output of 8 million tonnes per annum of LNG from two trains. It will also produce about 1.6MMtpa of liquefied petroleum gas.

Friday, 6 November 2009
PNN

The Hon Paul Henderson MLA speech from SEAAOC 2009

Welcome to NT Resources Week and in particular, to the combined South East Asia Australia Offshore or SEAAOC Conference… and the Mining the Territory Conference.

This is a great initiative between the Northern Territory Government, the NT Resources Council, and IIR.

I particularly welcome those of you who are visiting from interstate and overseas.

I want to talk to you today about jobs.

I want this to be the focus of my talk because I believe it is at the very core of what we are all trying to do.

When I see a new mine open or a new processing plant – I think about the jobs they will create.

Each job has its own story...read more

Happy 15th Anniversary SEAAOC!

To celebrate the 15th anniversary of the South East Asia Australia Offshore Conference (SEAAOC) the event moved to the plush new surroundings of the recently opened Darwin Convention Centre. Overlooking the new waterfront complex on one side and the Darwin LNG plant on the other with the Timor Sea stretching off into the distance, the location was the perfect setting for the 2009 event.




2009 also saw SEAAOC participate in the inaugural NT Resources Week, an event that incorporated the region's leading mining event, Mining the Territory, to provide delegates with even greater networking and business opportunities and an expanded exhibition.

Delegates were introduced to Northern Australia's largest and longest established petroleum conference with the official welcome reception at Parliament House. Hosted by the Hon Paul Henderson, NT Chief Minister, attendees were able to meet and greet informally whilst enjoying a chilled beverage and an unseasonal rain shower!

The conference itself began the following morning, with over 600 attendees witnessing a broad and comprehensive selection of speakers currently exploring, supplying, operating, governing and funding SE Asia and Australia’s booming offshore sector.

Highlights amongst the plethora of keynote presentations, panel sessions and interactive workshops were the Chief Minister’s bullish outlook for the future of the Territory’s spearheading of LNG projects, Sean Kildare’s positive endorsement of INPEX’s Darwin plant proposal, in addition to Alfredo Pires support for continued participation between Timor-Leste and Australia with regard to the Timor Sea Joint Development Area.

Rounding off the first day’s proceedings with a lavish dinner on the lawns of Sky City, delegates were able to compare notes on the day’s activities and engage in some serious networking whilst contemplating another portion of the delicious lemon tart!

The second day started with an interesting selection of internationally focused sessions outlining PNG’s LNG project and incisive financial outlooks from Angus Walker, Director Corporate Finance Oil and Gas, Paterson's and Tony Regan, Principal Consultant, Tri-Zen International.

The afternoon then broke away into an operational study outlining the benefits of the Kupe gas project alliance followed by technical presentations from Honeywell process solutions and Endress + Hauser. And a spotlight on service and supply issues for NT projects led by Kevin Peters, Executive Director, Northern Territory Industry Capability Network (NTICN) and senior representatives from regional firms Monadelphous, Universal Engineering NT and Shorelands Group.

With work done for the week it was time to kick back and relax at the SEAAOC Official Closing Function, or at least try and relax when the venue was Darwin’s infamous new attraction, Crocosaurus Cove!

Housing a number of 5 meter plus long crocs amongst other fearsome reptiles, delegates got the chance to get up close and personal with the Top End’s notorious predators, before sitting down to a tasty meal with fellow colleagues, and for starters...croc steaks!