Beach Energy and Itochu Identify Potential Sites for 1 Million-Ton LNG Facility in South Australia

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Researched by Industrial Info Resources (Sugar Land, Texas)--The memorandum of understanding between Beach Energy Limited (ASX:BPT) (Adelaide, Australia) and Itochu Corporation (TYO:8001) (Osaka, Japan) to develop a liquefied natural gas (LNG) facility and offloading terminal in South Australia is progressing after the joint-venture (JV) companies announced that they had identified potential sites for the complex.

The progress has been largely a result of recent discussions with the South Australian state government, which is keen for the LNG facility to be located in the state, and visits by the joint-venture company representatives to various sites in the Upper Spencer Gulf on the Great Australian Bight.

The most likely site for the facility is Port Bonython, which is to the north of Whyalla in the Upper Spencer Gulf. The region was targeted because of the excellent deep-water access and existing infrastructure, including pipelines to the gas fields of neighboring Victoria and the Cooper Basin.

Beach has extensive gas resources, which are estimated to be as high as 1.4 trillion cubic feet, in both Victoria and the Cooper Basin, which is in the northeast of South Australia and extends northward into southwest Queensland.

The company is also conducting investigations into shale gas in the Cooper Basin to extend its gas reserves. Two exploratory gas wells are planned and the first of these, Explorer-1, already has shown consistently high gas readings.

Beach also has moved to extend its gas reserves with the recently announced $70 million merger with Impress Energy Limited (ASX:ITC) (Perth, Australia), which has extensive holdings in the key western areas of the Cooper Basin. The merger is subject to the approval of the Impress shareholders at a general meeting of the company.

The proposed LNG and offloading facility will have a production capacity of 1 million tons per year, for which it will require around 60 petajoules of gas each year. The likely cost of the complex is about $970 million, but according to Beach Chairman Bob Kennedy, "many billions of dollars will be generated from it."

Production from the proposed facility is destined for export to markets in the Far East, including Japan, and the joint venture partners have set a target of first exports from the complex by 2014-15.

Beach, previously known as Beach Petroleum, is primarily engaged in oil and gas exploration, development and production and was founded in the early 1960s. The company now has oil and gas reserves of 66 million barrels of oil equivalent and contingent resources of 297 million barrels of oil equivalent, as of records dated June 2010.

Total sales revenue for the company for the financial year ended June 30, 2010, were $470 million, down about 16% from the previous year. Beach attributes this decrease largely to lower production volumes caused by flooding in the Cooper Basin and to unfavorable currency exchange rates.

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