The race to expand to Australia's liquefied natural gas export capacity has shifted into high gear.
Leading the pack are a proposed expansion of the $12 billion (Australian) Northwest Shelf LNG export project and a proposal to develop the nearby Gorgon gas fields complex, both off northern Western Australia. A number of other proposed projects are candidates for grassroots LNG projects in Australia (OGJ, Feb. 28, 1994, p. 16).
In a surprise development, the Australian government last week designated the West Australian Petroleum (Wapet) group's Gorgon proposal for environmental assessment. At the same time, Gorgon sponsors said potential undisclosed buyers may sign as early as March 1996 letters of intent to buy as much as 9 million metric tons/year of LNG from the project.
Woodside Petroleum Ltd., operator of the Northwest Shelf project, recently said there are enough potential gas reserves in its adjoining offshore acreage to justify a $4-5 billion expan- sion of the project without including nearby Gorgon field reserves to the north (OGJ, Oct. 23, p. 107).
That followed a proposal by Northwest Shelf and Gorgon partner Shell Australia Ltd. linking Gorgon development with the Northwest Shelf group's North Rankin/Goodwyn gas fields development to further the Northwest Shelf LNG expansion (OGJ, Aug. 14, Newsletter). That also would allow early development of Gorgon fields.
The government's disclosure surprised observers who had predicted Northwest Shelf fields expansion would be the favored new LNG development in the region.
Analysts now are moving toward the opinion that both projects may be approved in a staged development worth a combined $15 billion.
COMPETING PLANS
Australian Federal Resources Minister David Beddall described his agency's move to environmentally assess the project as a necessary and important step in the government's facilitation and approval process of what could be a project of great importance to Australia's economy and trade balance.
At an output of 9 million tons/year of LNG, Gorgon has the potential to triple Australia's current exports of LNG valued at $1.8 billion/year.
At the same time, the Woodside group plans to double its exports of LNG to about 14 million tons/year early next decade from the current 7 million tons/year.
The Woodside group this month disclosed it had signed new contracts with its current Japanese buyers for another 500,000 tons/year to boost its exports to about 7.5 million tons/ year.
This increase will be accomplished by debottlenecking the Northwest Shelf liquefaction plant, which started with a design capacity of 6.5 million tons/year in the mid-1980s. It is the second time Northwest Shelf buyers have expanded their volume commitments.
However, in order to double the project output, the Woodside group plans to add two more LNG trains, each with a capacity of more than 3 million tons/year. It too is urgently seeking purchase commitments in the form of letters of intent from potential customers in Asia so development can proceed.
COMPARING PROJECTS
At face value, Gorgon gas is less attractive than that from the Northwest Shelf fields because it has very little liquid hydrocarbon content and contains significant volumes of carbon dioxide. That calls for a larger production volume in order to create a viable development project.
However, the Wapet group is confident there are enough reserves to offset this shortcoming.
Wapet also cites forecasts of Asian LNG demand calling for an increase to as much as 150 million tons/year in 2010 from 54 million tons/year in 1994. This will come from increased demand in Japan, South Korea, and Taiwan, as well as by new entrants such as India and China.
Such estimates indicate the potential for both Australian projects to coexist early next century if the two groups can market their LNG in the region.
Northwest Shelf increases could be accommodated at the existing Burrup Peninsula liquefaction plant.
Gorgon gas also is likely to come ashore at Burrup, with processing facilities located a little to the south.
It is possible a new export wharf would be built as a joint project between the two groups to cut development and operating costs.
The critical task for both projects in the short term is to secure letters of intent to underpin their development proposals.
Wapet is the operating company for a venture of Chevron Asiatic, Texaco Oil Development, Shell Development (Australia), Ampolex. The Northwest Shelf group consists of Woodside, Shell, Chevron, BHP, BP Australia, and a combine of Mitsubishi and Mitsui.
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