DARWIN, Australia (Dow Jones Newswires), Jun. 1, 2009
Australia's Minister for Energy & Resources, Martin Ferguson, Monday said he expects consolidation to occur between liquefied natural gas plants planned for construction at Gladstone in Queensland state.
The government Monday also said it will release six new acreage areas for oil and gas exploration in 2009, three of which don't contain any existing exploration permits.
There are four separate LNG plants slated for construction at Gladstone and Royal Dutch Shell is studying the feasibility of building a fifth. To date, the three existing large-scale ventures have said they would be open to collaboration at the reserves or project level.
But they haven't flagged a complete merger of their ventures.
Ferguson, however, said he expects a shake-up soon. "I think there's going to be a smaller number at final investment decision time," he told reporters after an industry conference in Darwin.
The three existing large-scale projects are being built by U.K.-based BG Group (BG.LN) as a standalone entity, and joint ventures between Santos Ltd. (STO.AU) and Malaysia's Petroliam Nasional Bhd., or Petronas, and Origin Energy Ltd. (ORG.AU) and ConocoPhillips (COP).
Ryan Lance, senior vice president of international exploration and production at ConocoPhillips, said he expects "some natural shuffling" to occur between projects.
"Certainly, we're looking to work with the other projects that are there...from the upstream, the midstream and the downstream side of the business," Lance told reporters at the conference.
Notwithstanding their huge size, a decision to merge projects in some form could also be prompted by tough market conditions, characterized by lower LNG demand and an expected increase in supply.
Lance said ConocoPhillips and Origin are still aiming to make a final investment decision on their project in 2010 but acknowledged LNG demand has slumped considerably.
"We believe that once we come out of this economic recession...that LNG will be a fuel for the future and a fuel of choice," he said.
A smaller-scale project built by Liquefied Natural Gas Ltd. (LNG.AU), supplied by Arrow Energy Ltd. (AOE.AU), is also planned to be built at Gladstone.
On the exploration permit release, Ferguson said the six new zones include three large deepwater areas on the northern Exmouth Plateau offshore Western Australia state.
The other three acreage areas are in the central Great Australian Bight offshore South Australia state in the Ceduna Sub-basin, he said. Ferguson said that these three areas were "truly new frontiers", because no permits are currently held there.
Apart from the planned LNG projects at Gladstone, many others are slated for startup in Western Australia.
Ferguson said the government is finalizing regulatory arrangements for the carbon capture and storage element of the Chevron Corp. (CVX)-led Gorgon project, which is aiming for a final investment decision late this year. Ferguson said the cost of the project has been estimated at A$30 billion to A$50 billion.
He said environmental approval for the planned Browse LNG project, to be operated by Woodside Petroleum Ltd. (WPL.AU), is expected in 12 to 18 months.
Ferguson also said Monday that improving Australia's retention release system "is an area where I think we can make significant reforms".
Currently, retention leases involve five-year reviews, but some stake holders have expressed concerns that multinational energy companies are holding onto, and failing to develop, gas reserves to the detriment of the Western Australian domestic gas market, which is undersupplied.
The minister said the current rules could lead to potential uncertainty of tenure for fields that big oil companies may need for LNG production.
"On the other hand, it can lead to the frustration of domestic gas customers or LNG infrastructure owners who require gas and believe individual fields could be commercial earlier or more profitable if developed for other purposes," he said.
Ferguson said the government Monday will release a discussion paper on retention leases for consultation over the next two months.
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