Second NW Shelf line postponed

Australia's North West Shelf Project (NWSP) partners have delayed building a second offshore gas pipeline to shore after downgrading forecasts for Western Australia's gas market. Meantime, a "make-or-break" window is approaching for Chevron Asiatic Ltd.'s ambitious $1.3 billion Papua New Guinea-Queensland gas pipeline project, (OGJ, Sept. 7, 1998, p. 38). NWSP's slashed forecasts stem mainly from the Asian economic downturn, which has hobbled several iron ore processing

Nov. 30, 1998

2 min read

Australia's North West Shelf Project (NWSP) partners have delayed building a second offshore gas pipeline to shore after downgrading forecasts for Western Australia's gas market.

Meantime, a "make-or-break" window is approaching for Chevron Asiatic Ltd.'s ambitious $1.3 billion Papua New Guinea-Queensland gas pipeline project, (OGJ, Sept. 7, 1998, p. 38).

NW Shelf line

NWSP's slashed forecasts stem mainly from the Asian economic downturn, which has hobbled several iron ore processing proposals and other potential industrial developments.

The second line, expected to cost as much as $1 billion (Australian), was originally planned to start up by 2000 to ensure that NWSP did not miss domestic opportunities for lack of capacity in the existing 135-km pipeline. It is expected to be close to capacity when BHP's Port Hedland iron ore plant is in full production in June 1999.

The NWSP partners had been banking on at least one other hot briquetted iron ore proposal to go ahead and thus provide a baseload to justify the up front investment for a new line.

NWSP Operator Woodside Petroleum Pty. Ltd. says that timing of the second line will be linked to proposed expansion of the LNG project, scheduled to come on stream in 2003.

PNG gas line

Chevron has secured approval for its environmental impact statement and from the Queensland regulator for the pipeline's tariff and access agreements.

However, the company must also receive parliamentary approval from Papua New Guinea for the project by the end of November, as well as reach agreement for gas supply with Papua New Guinea operators Exxon Corp. and Oil Search Ltd. and convert memoranda of understanding with its five major potential Australian gas customers into "bankable" documents.

Finalizing a gas supply agreement with Exxon and Oil Search, owners of nearby Hides gas field in the Papua New Guinea highlands, is particularly crucial, because much of the resource within Chevron's jointly owned Kutubu fields is too inaccessible to be commercially produced. Papua New Guinea's proven gas reserves are about half what the pipeline project needs to sustain it for 30 years.