Subject: DJ: Woodside Studies East Timor Pipeline For Sunrise Gas

Woodside Studies East Timor Pipeline For Sunrise Gas

Dow Jones Newswires

March 10, 2004


of Dow Jones Newswires

PERTH -- Potentially giving an economic fillip to one of the world's newest and poorest nations, Woodside Petroleum (WPL.AU) said Wednesday that it may build a 150 kilometer pipeline to East Timor as part of its multibillion dollar Sunrise gas project.

The new plan, an alternative to two existing proposals, could bolster East Timor as it seeks a radical readjustment of maritime boundaries with its neighbor Australia.

A Woodside spokesman told Dow Jones Newswires that the company is looking at three alternatives for Sunrise consisting of a floating liquefied natural gas (LNG) facility, piping gas to an LNG facility in East Timor, or a pipeline to a Darwin-based plant.

"We aim to take one of these options into the basis of design phase for the project by the end of the year," he said.

Sunrise partners Royal Dutch/Shell Group (RD) and Woodside have previously backed floating LNG for Sunrise, while U.S. partner ConocoPhillips (COP) has argued in favor of a pipeline to Darwin.

ConocoPhillips is separately building a US$1.5 billion LNG plant at Darwin as part of its Bayu Undan project. Woodside has said previously that there are "possibilities for sharing infrastructure onshore" if Sunrise gas is landed at Darwin.

East Timor is only around 150km from Sunrise, much closer than the 450km-500 km distance to Darwin.

But East Timor lacks supporting infrastructure and skilled labor, and is viewed by analysts as a higher-risk site for a major LNG facility.

Woodside is eager to finalize a development plan to capture a rising demand for LNG imports in the U.S., along with the company's traditional markets in Asia such as China and Japan.

Japan's Osaka Gas Co. (9532.TO) owns 10% of the 7.7 trillion cubic feet Sunrise field and has been identified by Woodside as a potential LNG customer. Woodside has 33.4% of the project, ConocoPhillips has 30% and Shell has 26.6%, and Osaka Gas with 10%.

Whichever option is chosen, the design phase will likely take around 14 months, leading to a potential go-ahead for construction in 2006. LNG exports could start in 2009/10.

Pipeline Could Boost East Timor Boundary Case

Any move to pipe Sunrise gas to East Timor could bolster the country's claim that current seabed boundaries are invalid.

Under an interim Timor Sea Treaty between Australia and East Timor, Sunrise's reserves are split roughly 80% Australia and 20% to a Joint Petroleum Development Area.

The treaty provides for East Timor, which gained its independence in May 2002, to take a 90% share of royalties in the joint zone.

But East Timor argues that a boundary should be drawn midway between it and Australia, a shift that would place Sunrise and Bayu Undan wholly in East Timor waters.

The debate comes amid court action by a small U.S. petroleum company that is seeking US$10.5 billion in damages over oil and gas rights that were allegedly granted in the 1970s when East Timor was a Portuguese colony.

The U.S. suit filed by Oceanic Exploration Co. (OCEX) against ConocoPhillips and the governments of Australia, Indonesia and East Timor alleges "theft, misappropriation and conversion" of oil and gas resources. Oceanic said the defendants violated U.S. antitrust and racketeering laws in a series of events over the past 30 years.

In Australia, meanwhile, the so-called International Unitization Agreement (IUA) for Sunrise, was passed Wednesday by the lower house of Australia's parliament.

A spokeswoman for federal industry and resources minister Ian Macfarlane said that the IUA was approved by the House of Representatives and is now before the Senate.

"We'd hope to get it through the Senate this sitting session, which finishes late March, because the Sunrise partners want to start work on a development," she told Dow Jones Newswires.

Yet to be approved by the government of East Timor, the IUA is meant to provide certainty to the Sunrise partners over taxation and other fiscal terms.

"The IUA creates the framework in which the joint venture can proceed with an investment decision while the governments continue to resolve the border issue," the Woodside spokesman said.

-By Stephen Bell, Dow Jones Newswires

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