Magellan buys into Evans Shoal field in Timor Sea

Rick Wilkinson
OGJ Correspondent

MELBOURNE, Mar. 31 -- Magellan Petroleum Australia Ltd., Brisbane, has acquired the 40% share in undeveloped Evans Shoal natural gas field in the Timor Sea from Santos Ltd., Adelaide. Evans Shoal lies on permit NT/P48.

Magellan will pay Santos $100 million (Aus.) cash over several tranches with final payment due in this year’s second half. Magellan also will pay $50 million (Aus.) on any final investment decision to develop Evans Shoal and another $50 million (Aus.) upon first gas production from NT/P48.

Magellan made the acquisition after being awarded the adjacent NT 09-1 exploration permit in the 2009 acreage release.

The company has an agreement with an unnamed methanol producer for construction and operation of a possible onshore methanol plant near Darwin.

Evans Shoal was originally found by BHP Petroleum in 1988 and confirmed by Timor Sea Petroleum in the 1990s.

The field, although large with an estimated 6.6 tcf of gas, has a high carbon dioxide content similar to other nearby fields in this part of the Timor-Arafura Sea north of Darwin, which has been a stumbling block to development.

However, high CO2 is a plus for methanol production and at one stage the MEO Australia Ltd. group tried to make a deal with the Evans Shoal group to feed into its proposed Tassie Shoals offshore artificial island methanol and LNG development proposal.

A similar outlet for the CO2 appears to be a part of Magellan’s plans. The company says Evans Shoal is unique in its fit with Magellan’s strategies. It hopes to work with the other members of the field joint venture (Petronas Carigal 25%, Shell Australia 25%, and Osaka Gas 10%) to come up with a development plan.

The sale is part of Santos’ move to dispose of noncore assets. Santos recently sold a 60% stake in the Petrel, Term, and Frigate fields in the Bonaparte Gulf to GDF Suez for $220 million (Aus).

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