Partners in Australia's North West Shelf liquefied natural gas development/export project have reached preliminary agreement with the project's Japanese buyers for an additional 6.8 million tons/year of LNG early next century.
That paves the way for a proposed $5-6 billion (Australian) expansion of the North West Shelf project to about double capacity.
Meantime, Australia's operators have a busy and interesting offshore drilling program for the third quarter, with a flurry of activity in North West Shelf region pointing the way to increased gas reserves in the region.
Expansion buyers lined up
North West Shelf group leader Woodside Petroleum Pty. Ltd. confirmed that a 'letter of indication' for the additional LNG volumes is being drafted following talks in Tokyo last month.
The expansion of output would involve the addition of two new LNG trains at the Burrup Peninsula facilities, each with a capacity of 3.4 million tons/year of LNG.
Further confirmation of the proposed expansion came from Shell Australia Chairman Roland Williams during a talk in Brisbane this week when he said the North West Shelf participants plan to spend $5-6 billion to lift current LNG production capacity to 13.5-15 million tons/year from 7.5 million tons/year.
Williams said this would make the North West Shelf LNG project one of the world's largest, and the addition of another eight LNG carriers to transport the gas to market would make it one of the world's largest shipping concerns.
Partners tentatively suggest the $5 billion-plus expansion could be on stream by 2003.
If the new contract materializes, it will markedly improve the rate of return from the North West Shelf project which, to this point, has averaged only 6%. A $5 billion expansion, effectively doubling the project's gas output, would be much cheaper than the original North West Shelf investment of $12 billion to establish the initial production of 7.5 million tons/year.
The contemplated expansion would lift the project's rate of return to nearly 8%.
It is not yet clear whether a successful North West Shelf project expansion would hinder current efforts to implement a new LNG project based on gas reserves at the nearby Gorgon fields. However, Asian demand for LNG is forecast to soar in the first 2 decades of the new century as gas is increasingly used as a domestic and industrial fuel and to replace coal as an electricity generating fuel.
Shelf drilling picks up
Prospects for adding gas reserves in the North West Shelf area are brightening with a flurry of drilling planned there.
This is the view of Wood Mackenzie Consultants Ltd., Edinburgh, which noted three semisubmersible rigs, one jack up, and a drillship are currently drilling there.
The analyst said 1 Dionysus well operated by West Australian Petroleum Pty. Ltd. and 1-A Lynx well operated by Woodside Petroleum Ltd., have huge implications for the future shape of North West Shelf LNG projects.
The 1 Dionysus is a northerly appraisal of the 1 Chrysaor gas discovery drilled from Rankin field platform. It is being drilled by the Jack Bates semisubmersible.
The 1-A Lynx was respudded because of stuck pipe at 2,090 m and is programmed to a total depth of 5,200 m.
The Lynx well is being drilled by Sedco 702 semisubmersible, which will afterwards move on to drill 1 Perseus South, an evaluation of a fault block south of the Perseus gas discovery.
The Maersk Victory jack up was to complete 1 Greenshank well for Apache Corp., said Wood Mackenzie, before spudding the 1 Helicon for the same company in early July. The Greenshank was reported to be disappointing to date.
Elsewhere, the Ocean Epoch semisubmersible is drilling 1-A Cognac well in the Dampier subbasin, to enable Amerada Hess Corp. to acquire a farm- out in the license to take a 25% interest. This well was respudded due to stuck pipe and an unsuccessful sidetrack attempt.
The Peregrine III drillship is drilling 2 Scarborough well on the Exmouth plateau for operator Esso Exploration & Production Australia Inc. This is an appraisal of the 1979 Scarborough discovery.
Ocean Epoch is contracted to drill 1 Livet well for Seafield Resources plc, London, following the 1 Cognac well.
Following the Scarborough well, Peregrine III is due to spud 1 Leyden for BHP Petroleum Pty. Ltd., a deepwater wildcat on the Exmouth plateau.
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