|Subject: Interview: Crunch Time Soon For
Timor Sea Devt Decisions
Dow Jones Newswires September 27, 2001
INTERVIEW: Crunch Time Soon For Timor Sea Devt Decisions
By RAY BRINDAL Of DOW JONES NEWSWIRES
CANBERRA -- October looms as a crucial month for decisions about development of billions of dollars of energy projects in the Timor Sea, Paul Henderson, resources minister in Australia's Northern Territory government, said late Thursday.
These investments decisions will have important implications for the industrial base of the Northern Territory and its capital city, Darwin, and for long-term gas supplies for southeast and eastern Australian markets, he said.
Moreover, the decisions about how, when, where and if some of the biggest energy companies develop the Timor Sea's world-scale natural gas resources will have major impact on government revenues for Darwin's fledgling northern neighbor, East Timor, which could gain substantial royalties if the projects proceed.
"The people we are talking to are still developing the technical and financial components of either options and we're still on track to have a decision likely to be taken towards the end of October," he said.
In particular, he was referring to decisions about the type and location of a liquefied natural gas plant based on the Sunrise project in the Timor Sea.
Henderson was also referring to a decision expected from Canada's Methanex Corp. (MEOH) about whether it will site a US$1.5 billion methanol plant in Darwin using gas feedstock from Sunrise and the Bayu-Undan project.
Methanex has been frustrated for some months at being unable to secure agreement over a gas supply, culminating in a reported warning this week it might take its business to the Burrup Peninsula in Western Australia state, and source the fuel from the North West Shelf project.
Sunrise JV Mulls LNG Plant Type, Location Sunrise joint venture partners are considering whether to locate a LNG plant at Darwin - as proposed by 30% stakeholder Phillips Petroleum Co. (P) - or whether they should support a lower-cost floating LNG plant directly above the offshore field proposed in August by 26.6% stakeholder Royal Dutch/Shell Group (RD).
Other partners in Sunrise include operator and 33.4% stakeholder Woodside Petroleum Ltd. (A.WPL) and Japan's Osaka Gas Co. (J.OSG), which holds 10% of the project.
In June, Henderson's predecessor Daryl Manzie said almost A$14 billion of offshore, pipelines and onshore gas-based developments were lined up to proceed.
The new Northern Territory government also wants Phillips to restart stage 2 of its Bayu-Undan project, which it indefinitely deferred July 31 as a result of a tax dispute with the East Timor government.
The decision by Phillips to defer stage 2 of Bayu-Undan, which was to run a US$500 million pipeline to Darwin from the field 500 kilometers northwest of Darwin, was a "real body blow to confidence" in the northern gas industry, Henderson said.
The plan for this pipeline was to link with one from Sunrise before landing in Darwin.
The "main game in town" for his government is to get gas from Bayu-Undan and Sunrise onshore "in significant volumes to enable a gas province and an industrial base for the Northern Territory economy to come to fruition," he said.
The pipeline also has national significance with pipeliners formulating plans to haul the gas south into major Australian markets, he said.
The minister said the mandate given to East Timor's first democratically elected leader Mari Alkatiri and fresh faces from the Northern Territory after the Labor Party's surprise election win in August could help talks.
Northern Territory Chief Minister Claire Martin and Henderson have met Alkatiri for talks in Dili and Darwin and stressed "our total commitment to developing a very positive relationship with the new government in East Timor."
Govt Relations Cordial "Those discussions have been very fruitful, very harmonious," he said.
Alkatiri and the previous Northern Territory administration fell out earlier in 2001 after a clumsy attempt to pressure the East Timorese leadership ahead of the election.
"We are a step closer today in terms of resolving the outstanding issues between East Timor, Phillips and the other joint venture partners," Henderson said.
"We want to be good neighbors, we want to work with Timor in cooperation in developing their resources for the mutual benefit" of both, he said.
Talks between participants to progress the developments haven't stalled, he said, but are taking place in private.
There isn't any lack of effort by all parties to reach decisions to optimize the resources, he said.
"That work is still being progressed," it just isn't happening through the media, he said while denying that development of the entire province has lost momentum.
Henderson said Sunrise and Bayu-Undan are world-class gas resources with companies involved already having spent substantial sums on exploration, proving fields and developing commercial plans.
"Everyone is trying to maximize their position" now, he said.
The world-class nature of the Timor Sea gas province was underscored last month when Woodside reported the discovery of a potentially multi-trillion cubic feet natural gas discovery after drilling the Blacktip-1 well, 300 kilometers southwest of Darwin, 50 kilometers north of the Australian coast on the southern edge of the Timor Sea.
"Any significant strike like Blacktip only enhances the total reputation of the Timor Basin as being a world class area in terms of exploration for oil and gas," Henderson said.
Woodside is operator and 35% stakeholder of Blacktip, Shell has 35% and Italy's ENI SpA (E) holds the 30% balance.
-By Ray Brindal, Dow Jones Newswires; 612-6208-0902; firstname.lastname@example.org
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