Bruce Hextall – BHP Petroleum and large US oil and gas group Phillips Petroleum should decide by the end of March whether to press ahead with the development of a $2 billion-plus liquefied natural gas (LNG) project which would exploit the Timor Sea's Bayu/Undan gas field.
The two oil majors are locked in negotiations about the best way to exploit the field, which extends over permits operated by both BHP and Phillips in the Timor Sea Zone of Co-operation.
BHP, and its other Australian partners, Santos and Petroz, have previously favoured a lower capital cost liquids-stripping development with the gas being reinjected for future use, but growing demand for LNG means there could be a profitable market for the field's gas in the near term.
BHP Petroleum president and group general manager (Australia Asian region) Mr Mike Baugh said yesterday a number of development opportunities were being assessed, including the possibility of establishing Australia's second LNG project. As well, the North-West Shelf partners - including BHP - are pressing to double the size of this project because of Japanese and Korean customers' readiness to sign additional long-term contracts.
Speaking at an oil and gas conference in Sydney yesterday, Mr Baugh said the Bayu/Undan partners were holding discussions on the siting of an LNG plant in Darwin or Timor.
But BHP has also raised the possibility of an offshore LNG development utilising floating production facilities.
Mr Baugh said there were a number of issues to be resolved before development of the LNG project went ahead, including the size of the reserves and whether there was sufficient market demand. At present, BHP estimates Bayu/Undan contains about 2.2 trillion cubic feet of gas, making it a significant gas field. Work to date indicates at least 160 million barrels of condensate could also be extracted.
The BHP estimates are expected to be conservative when the results of further exploration work are known. Bayu/Undan is already rated as one of the best gasfield discoveries in this part of the world since the Bass Straight find.
Bayu and Undan sit in separate production-sharing contract areas but are on the same structure of some 160 square kilometres.
BHP is the largest interest holder in the Undan permit (ZOCA 91-12) with 42.41 percent. Santos has 21.42 percent and Petroz 14.94 percent. A Phillips-led consortium operates the adjoining Bayu permit area.