Subject: Bloomberg: Shell Say Australia Backs Its Sea Gas Plan

Bloomberg News

February 28, 2002, Thursday 3:05 AM Eastern Time


Dudley White in Perth and Jason Gale in Melbourne (613) 9288 8701 or through the Sydney newsroom with Gemma Daley in Canberra. Editor: Gosman, Langan


BODY: Royal Dutch/Shell Group said the Australian Government is backing its $4.9 billion plan to use a floating natural gas platform to pump gas from the Timor Sea over a rival proposal from partner, Phillips Petroleum Co.

Prime Minister John Howard met with representatives from Shell, Phillips and Woodside Petroleum Ltd., the operator of the Greater Sunrise natural gas project this week. Resources Minister Ian Macfarlane said the government won't intervene to block the Shell plan.

Phillips, which aims to supply $20 billion of liquefied natural gas to El Paso Corp. customers in California, wants to pipe the gas onshore. Shell says its floating platform proposal, which includes a LNG plant, is 40 percent cheaper.

"The (Australian) government has endorsed the proposal, so things are moving in the right direction," said Shell spokesman Antonius Papaspiropoulos, adding Shell is targeting an agreement by the end of next month.

Northern Territory government officials have been lobbying the federal government to reject Shell's plan because they say it would endanger A$17 billion ($8.8 billion) in investment in the capital Darwin.

Last year, Howard's government blocked Shell's $3.2 billion takeover of Woodside saying it wasn't in the national interest after concerns were raised during last year's federal election about control of the $7.2 billion North West Shelf natural gas project.

East Timor

East Timor chief Minister Mari Alkatiri, said in an interview at the Gas to Liquids conference in Perth said: "I was told that the option for Sunrise is floating LNG technology instead of bringing the products" onshore, he said. "I was told that this decision was already taken a few days ago."

Shell said the partners are still talking. Shell has a 26.56% stake in Sunrise, Phillips 30%, Osaka Gas Ltd. 10% and Woodside 33.4%.

"We're still sorting through the commercial aspects of the proposal with the joint venture partners," Shell's Papaspiropoulos said in Melbourne. "There is obviously an alignment now with Woodside and Shell, but we need alignment with all joint venturers before we have a deal."

Woodside managing director John Akehurst earlier this month expressed his support for the Shell plan. "In the end, it is a case of whether the project would proceed if the companies were forced to bring the gas onshore," Macfarlane told reporters. "There is a fairly compelling argument that says that says the only way this project will work is through a floating LNG platform."

Macfarlane said it's not the government's role to intervene in commercial decisions. "Are we going to regulate to force Shell and its partners to come ashore? No," he said. "This is a commercial decision."

In August, Shell said it wanted full ownership of its proposed Sunrise floating plant in return for assuming the risks of proving the untried technology. It also would charge its partners a fee for processing oil and gas from nearby fields off northern Australia.

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