Ian Howarth – BHP Petroleum was announced yesterday as the operator of a new multibillion-dollar oil and gas development in the Timor Sea, based on the rich Bayu-Undan discovery.
The $1 billion first stage of the project was confirmed yesterday, and the final details of an associated proposed liquefied natural gas (LNG) project will be settled within weeks.
BHP Petroleum was selected as the operator by the nine-member consortium that owns the Bayu-Undan field, discovered in January 1995.
Although it has not been fully explored, Bayu-Undan is already estimated to contain a minimum of 3.4 trillion cubic feet of gas and around 400 million barrels of hydrocarbon liquids.
The discovery is easily the biggest in the Timor Sea and confirms the potential of the Timor Gap region, one of the prime targets in a billion-dollar exploration boom around the north-west coast.
The Timor Gap, once the subject of a lengthy international border dispute between Australia and Indonesia, has already yielded the rich Buffalo, Laminaria, Elang, Kakatua and Corralina oil discoveries.
The Bayu-Undan consortium will initially spend more than $1 billion on facilities to strip condensate (light oil) and liquefied petroleum gas from the reserves, with first production expected in late 1998.
A new LNG facility, costing up to several billion dollars, could be built later to liquefy the remaining natural gas for export.
BHP and US-based Phillips Petroleum want to use very different LNG production technologies in the Bayu-Undan development.
BHP is keen to develop the world's first offshore LNG facility in the Timor Gap, but Phillips wants to use its established technology in a more conventional LNG development to be built near Darwin.
The Bayu-Undan consortium expects to decide on the LNG project – utilising either BHP's plan or the Phillips proposal – within the next few weeks.
Development of the Bayu-Undan field has been hampered because the field is spread across the boundaries of two adjoining exploration permits, one operated by BHP Petroleum and the other by Phillips.
The key agreement reached yesterday was the position of operator, a requirement of the Timor Gap Zone of Co-Operation Joint Authority – made up of Australian and Indonesian officials – which administers the Timor Gap region. An actual development decision for the stage one liquids stripping project, which will utilise floating production and storage facilities, is likely to be made later this year.
BHP Petroleum president and group general manager Australia/Asia, Mr Mike Baugh, said yesterday: "The selection [of BHP as operator] was confirmed by the participants of both the ZOCA 91- 12 and ZOCA 91-13 joint ventures at meetings in Melbourne late last week.
"The single field extends across both contract areas and any development will be carried out under the framework of a unitisation agreement and utilise shared facilities." The actual percentage equity interests in the Bayu-Undan field have not been decided, although spokesmen for several of the participants said yesterday that the formula by which those equity shares will be determined has been agreed between the participants.
Mr Baugh said yesterday that the field would be developed using an "integrated project team involving BHP Petroleum, Phillips Petroleum [operator of ZOCA 91-13] and possibly other co-venturers in both 91-12 and 91-13."
Joint venturer partners in ZOCA 91-12 are BHP Petroleum with 42.427 per cent, Santos Ltd with 21.43 per cent, Inpex Sahul Ltd with 21.21 per cent, Petroz NL with 13.37 per cent and Emet Pty Ltd with 1.58 per cent. In ZOCA 91-13 the partners are Phillips Petroleum with 60 per cent, Oryx Energy with 25 per cent and the UK-based Hardy Petroleum Ltd 15 per cent.