East Timor Rejects Woodside Petroleum's Plans for Floating Gas Platform for Sunrise Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--The government of Timor-Leste has rejected a proposal announced at the end of April by the Sunrise consortium, which is led by Australian hydrocarbon giant Woodside Petroleum Limited (ASX:WPL) (Woodside) (Perth, Australia), that supported the use of a floating liquefied-natural gas (FLNG) platform as the preferred option to handle gas from the Greater Sunrise gas fields.

The Sunrise consortium consists of Woodside, which holds a 34% interest in the project, together with ConocoPhillips (NYSE:COP) (Houston, Texas), which holds 30%; Royal Dutch Shell plc (NYSE:RDS.A) (Shell) (The Hague, Netherlands), which holds 26.6%; and the Osaka Gas Company Limited (TYO:9532) (Osaka, Japan), which holds the remaining 10%.

In an announcement on April 29 to the Australian Stock Exchange (Sydney, Australia), Woodside stated that the Sunrise consortium had unanimously selected FLNG as the option that best satisfies the requirements of the agreement signed between the governments of Australia and Timor-Leste in February 2007.

The International Unitisation Agreement, signed by both governments, required the participants in the Sunrise consortium to "develop the Greater Sunrise fields to the best commercial advantage consistent with good oilfields practice."

The consortium selected the FLNG option after extensive research into all options, including the utilization of the ConocoPhillips existing on-shore gas processing plant at Darwin, in Australia's Northern Territory, or the construction of an undersea pipeline to send the gas to a new processing plant in Timor-Leste.

The consortium rejected the concept of an undersea pipeline as being too expensive because of the deep undersea trench that lies between the gas field and Timor-Leste, and the on-shore processing option in Darwin was rejected because Darwin has reached saturation point for housing and infrastructure.

The Greater Sunrise gas and condensate resource lies beneath the Timor Sea, about 450 kilometers north of Darwin. It includes the Sunrise and Troubadour deposits, which together have estimated reserves of 5.13 trillion cubic feet of dry gas and 225.9 million barrels of condensate. The resource was discovered in the 1970s, but it was not until 2004 that the governments of Australia and Timor-Leste--a small island that gained independence from Indonesia in 2002--agreed to split the resource on a 50/50 basis.

On April 30, just a day after Woodside's announcement, the Timor-Leste government rejected the FLNG option, stating that it would only consider a solution that would include processing the gas on-shore in Timor-Leste. The government threatened that "if the pipeline does not come to Timor-Leste, we will leave it for the next generation."

To date, no FLNG plants are operational in the world, but in July last year Shell awarded a contract to a joint venture between the French Technip Group S.A. (EPA:TEC) (Paris, France) and Samsung Heavy Industries Company Limited (SEO:010140) (Seoul, South Korea) for the design, construction and installation of the first FLNG facility, with the option for a further nine units over the next 15 years.

The first unit is scheduled to be used by 2016 in the Shell Prelude and Concerto gas holdings in the Browse Basin, off the coast of Western Australia. By using a floating processing plant, the associated costs of pipeline construction are removed, making the option far more attractive, with the added benefit that the FLNG can be transported to other fields as required.

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