Origin Energy, ConocoPhillips Acquire Laird Point Site for $29 Billion LNG Project in Queensland

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Researched by Industrial Info Resources (Sugar Land, Texas)--Australia Pacific LNG (APLNG) (Brisbane, Australia), a 50:50 joint venture between Origin Energy Limited (ASX:ORG) (Sydney, Australia) and ConocoPhillips (NYSE:COP) (Houston, Texas), has secured a 230-hectare site at Laird Point on Curtis Island from the state government of Queensland for developing a proposed liquefied natural gas (LNG) plant. The venture will set up a $29 billion plant for converting coal seam gas (CSG) to LNG at the site, located off the Port of Gladstone.

Origin Energy and ConocoPhillips will undertake an environmental impact assessment of the site. The results of the study will be submitted early next year, followed by an investment decision expected by the end of 2010.

The proposed facility will consist of four production units, the first of which is scheduled for completion in 2014. The four trains will utilize Conoco Phillip's proprietary Optimized Cascade process technology for CSG-to-LNG conversion. The four units are planned to begin operations with a combined processing capacity of 15 million tons per year from 2014, but starting up all the trains simultaneously will not be possible, according to Grant King, Managing Director of Origin Energy.

The LNG processing facility at Laird Point will operate on a feedstock of CSG procured from APLNG's Fairview, Peat and Spring Gully fields in the Bowen Basin in central Queensland, and the Walloon Coals field in the Surat Basin. The gas fields are located about 400 kilometers away from the Laird Point site. The two regions are estimated to have a gross resource base of 42 trillion cubic feet, and a prospective resource of 17 trillion cubic feet of coal bed methane.

Last fiscal year, APLNG assessed the proved and probable level of CSG reserves at 4,793 petajoules equivalent. However, for the fiscal year ending June 30, 2009, the venture reported a 52% increase in reserves at a proved and probable level of 7,265 petajoules equivalent, the largest in the country. The total proved, probable and possible reserves increased by 25% on a year-on-year basis from 10,222 to 12,627 petajoules equivalent. APLNG's annual production of CSG of increased by 35% on a year-on-year basis to about 60 petajoules equivalent, accounting for nearly 33% of Australia's total CSG production.

The venture partners are expected to award a design and engineering contract later this year for the development of a 400-kilometer CSG transportation pipeline connecting the gas fields to the LNG processing facility. Origin is also negotiating fuel supply agreements with buyers; however, the firm does not anticipate binding agreements to be in place until next year. Output from the LNG processing facility will be exported mainly to Asia.

According to an independent study conducted by KPMG Econtech (Canberra, Australia) to assess the economic impact of the project, an average of 10,300 direct and indirect employment opportunities are expected to be created nationwide during the 10-year construction period of the project, surging to a peak of 18,600 nationwide, including 14,600 in Queensland, between 2012 and 2015. The project also would be responsible for the generation of 9,000 direct and indirect employment opportunities after the construction phase. The report also indicated that, when fully operational, the project would contribute an annual increase of $2 billion, equivalent to 0.9%, in Queensland's gross state product, and of $1.3 billion, equivalent to 0.12%, in Australia's gross domestic product.

The project is one among a total of five CSG-to-LNG conversion plants being developed on Curtis Island. Origin Energy and ConocoPhillips will be working alongside BG Group Plc (OTC:BRGYY) (Berkshire, United Kingdom), Royal Dutch Shell Plc (NYSE:RDS.A) (The Hague, Netherlands), and a joint venture of Santos Limited (OTC:STOSY) (Adelaide, Australia) and Petroleum Nasional Berhad (Petronas) (Kuala Lumpur, Malaysia), all of which are setting up separate LNG processing facilities on the island.

APLNG reportedly had lobbied in vain for another location farther south on Curtis Island. Analysts believe the Laird Point site would require the firm to undertake more dredging activities compared to competing projects. In addition, because it was the last to be announced, the project will have a tighter deadline and is expected to run a greater risk of delays than competing projects on the island.

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