APPEA: Pluto, Wheatstone fields to be developed separately

June 15, 2009
Woodside Petroleum Ltd. and Chevron Australia Pty. Ltd. are likely to develop their respective Pluto and Wheatstone gas field-LNG projects as separate entities and compete for third-party gas, company officials indicated at the recent Australian Petroleum Production & Exploration Association conference in Darwin.

Woodside Petroleum Ltd. and Chevron Australia Pty. Ltd. are likely to develop their respective Pluto and Wheatstone gas field-LNG projects as separate entities and compete for third-party gas, company officials indicated at the recent Australian Petroleum Production & Exploration Association conference in Darwin.

Woodside Chief Executive Officer Don Voelte called for rival LNG projects to share production hubs on the Western Australian coast. Woodside’s $12 billion (Aus.) Pluto LNG project on the Burrup Peninsula near Dampier has nearly completed construction of its first LNG train and is looking for more gas to support construction of a second.

Roy Krzywosinski, Chevron managing director for Australia, said gas for his company’s proposed Wheatstone project would be processed at a $30 billion (Aus.) liquefaction plant to be built at Ashburton North near Onslow, 150 km south of Dampier. He said Wheatstone has enough gas to underpin a multiple-train development.

Voelte warned ad hoc developments along the coast would waste billions of dollars and risk delaying projects, leading ultimately to loss of jobs and increased competition with international rivals in the world LNG market.

Chevron wants to attract third-party gas from the western Carnarvon basin that would not be economic to transport to the Burrup Peninsula. Krzywosinski said the Wheatstone plant would lower the economic threshold for other area discoveries. A final investment decision on Wheatstone is expected in 2011.

Chevron seeks to renew its retention license over Wheatstone field. However, Woodside reportedly has submitted an alternative proposal to bring Wheatstone to Pluto. Voelte said there are no excuses for delay.

Geologically, Pluto and Wheatstone fields are two lobes of the same structure. The Artemis extension to the northeast owned by MEO Australia Ltd., Melbourne, has yet to be drilled. Preliminary work suggests it is part of the same elongated structure. MEO is seeking farm-in partners for a drilling program.

CSM LNG

ConocoPhillips may participate in reshuffling the four LNG projects planned for the Queensland port of Gladstone, based on coalseam methane (CSM) feedstock.

Company executive Ryan Lance told conference attendees that some “natural shuffling” could occur as players like BG Group PLC, Santos Ltd., Arrow Energy Ltd., and ConocoPhillips’s JV partner Origin Energy Ltd. consider how to optimize costs for development of CSM fields in the Surat and Bowen basins, as well as gas transportation and LNG production facilities.

Santos Ltd. Chief Executive Officer David Knox said it makes sense in terms of improving capital efficiency and reducing environmental impact. However, he noted cooperation between rival projects will be hard to accomplish.

Australian Resources and Energy Minister Martin Ferguson said companies should do more through commercial negotiation to help speed project approvals. He said the emerging CSM-to-LNG is likely heading for a major shakeout.

Io-Jansz unitization

Under a recently signed agreement, BP PLC will sell gas from its Io field to Shell as part of the Gorgon-Jansz project on Barrow Island off Western Australia and repurchase it after it is processed at the proposed LNG plant.

BP has 12.5% interest in the WA-25-R and WA-26-R permits containing the Io field adjacent to the giant Jansz field. The deal will enable unitization of Io and Jansz.

Separate pipelines will link Jansz-Io and Gorgon fields to the proposed three-train plant on Barrow. Project partners are Chevron with 50% and Royal Dutch Shell PLC and ExxonMobil Corp. with 25% each.

More oil discoveries needed

Australia’s oil and condensate production is declining, and the country urgently needs new discoveries, according to Belinda Robinson, APPEA’s executive director.

Australia has gone from virtually 100% self-sufficiency in 2000 to just over 55% domestically supplied in 2009. Without new discoveries, it will drop to 32% self-sufficiency by 2017.

This translates into a decline in petroleum trade balance from a surplus of $900 million (Aus.) in 2000 to a deficit of $13.2 billion (Aus.) in 2009 and a massive deficit of $28 billion (Aus.) in 2017.

Robinson said this is cause for concern, although experts believe there is more oil to be found because Australia has vast, unexplored, and untapped petroleum basins and resources. Less than 25% of Australia’s 50 potential petroleum provinces have been explored.

Federal and state governments need to work together to open onshore and offshore frontier basins if the country is to rein in its burgeoning trade deficit in petroleum, Robinson said.

A two-pronged approach is required, including continued availability of baseline geological data and a more open fiscal regime that can remove for small to mid-cap explorers some of the risks of high cost exploration of frontier areas, he said.

Safety improvement needed

Federal Resources and Energy minister Martin Ferguson told conference attendees the oil and gas production industry needs to improve its safety performance. He said that while its performance was reasonably good compared with other industries, this was overshadowed by the gas plant explosion on Varanus Island in 2008.

Ferguson said it is vital that the lessons of major incidents are learned and addressed to prevent reoccurrences. The regulatory regime, he said, needs to provide for no-blame independent safety investigations in all jurisdictions.

The Australian National Offshore Petroleum Safety Authority said personal injury rates were steady but relatively high compared with other countries.

LNG oversupply looms

Market analysts have warned of a near-term LNG surplus with new supplies predicted to rise 25% in 2010. In addition, the surge of US gas production from nonconventional sources like shale has closed that market to imports and driven down gas prices.

Richard Jones, deputy executive director of the International Energy Agency, told the conference it is a buyers’ market at present. Jones was unconvinced the recent recovery in the oil price (against which LNG is priced) is supported by fundamentals.

Jones said oil stockpiles in the US are at 20-year highs. Although higher prices may be a harbinger that those stocks are going to start coming down, there are no guarantees, he said.

Analysts predict the slump in LNG demand and prices will be short-lived and strong demand will reemerge from 2013. Meantime, Australian projects are battling to secure long-term supply agreements.

Oliver field

Adelaide-based Stuart Petroleum Ltd. said geophysical and reservoir engineering studies on its Oliver oil field in the Timor Sea have upgraded the estimated volume of hydrocarbons in the Oliver structure.

The gross mean potential for the field has risen 165% over original estimates to more than 800 bcf of gas in-situ and more than 30 million bbl of condensate in place. The mean average oil in place has risen 25% to 53 million bbl.

Tino Guglielmo, Stuart managing director, said the Oliver’s estimated possible reserves are 1.5 tcf of gas in place, 56 million bbl of condensate in place, and an oil leg of 100 million bbl in place.

Oliver likely will be developed as an oil and gas liquids stripping operation, with gas reinjected into the reservoir for later production and sale.

The Oliver-2 appraisal well is planned for December or January using the semisubmersible Songa Venus.

The field is in permit AC/P33 some 700 km west of Darwin. It was found by BHP Petroleum in 1988. Stuart farmed into operatorship and 50% interest last August. The Melbourne-based Albers Group has the remaining 50%.

Santos sells PNG interest

Santos in Adelaide executed a conditional agreement to sell for $20 million its 50.353% interest in the retention lease PRL 5 in the Papua New Guinea forelands to Thailand’s P3Global Energy Co. Ltd. PRL 5 contains Ketu and Elevala gas-condensate fields. Santos said the permit was not strategic to its operations.

The move follows Horizon’s sale of 24.82% interest in PRL 5 in May to P3GE, a private concern with core business in petroleum exploration and production as well as gas transmission and distribution.

Santos retained its interests in the PNG LNG project operated by ExxonMobil Corp., but it has executed a conditional agreement to sell its 9% interest in the Kakap Indonesian JV.