Andrew Trounson, Melbourne – Plans to market natural gas from the Greater Sunrise fields in the Timor Sea to markets in Australia are to be abandoned, with the partners in the project now expected to target offshore markets, potential customers say.
But the future of the project remains uncertain, with a question mark over whether 30% field partner ConocoPhillips (COP) is prepared to back Royal Dutch/Shell Group's (RD) preference to develop the field using its floating LNG technology and targeting markets in North America.
The Greater Sunrise fields are estimated to host over US$30 billion worth of gas.
ConocoPhillips had strongly promoted the so-called domestic gas option over an LNG development, in the face of opposition from Shell with 26.6% and Australia's Woodside Ltd. (A.WPL) with 33.4%.
A decision on the way forward for the project is expected within days or next week.
Mining company MIM Holdings Ltd. (A.MIM), a potential domestic customer for Greater Sunrise natural gas, confirmed Monday that the domestic option had been abandoned.
"I can confirm that we have been advised that the [Greater Sunrise] joint venture has decided to cease work on the domestic gas activities," an MIM spokesman told Dow Jones Newswires.
MIM had been considering taking Greater Sunrise gas to power a possible metal-processing facility at its McArthur River zinc mine in the Northern Territory. Alternative energy sources are Oil Search Ltd.'s (A.OSH) and ExxonMobil Corp.'s (XOM) proposal to pipe gas from Papua New Guinea to markets in Australia, or coal-fired energy using coal from MIM's own mines.
Woodside spokesman Niegel Grazier said the joint venture partners are working to agree a unified way forward for Greater Sunrise and that a decision could be made within days.
"We are working with the joint venture to reach a fully aligned position for the forward work program," Grazier said.
However, Grazier conceded that the project's timetable of first gas by 2008, under the floating LNG option, is coming under pressure.
In addition to having to agree a market for the gas and the right development option, the partners are also waiting on the Australian and East Timorese governments to agree a so-called International Unitization Agreement on the project. Greater Sunrise lies partly in the Joint Petroleum Development Area of cooperation between Australia and East Timor.
"Any serious commitment to the design phase would require us to have the IUA issue resolved and significant comfort in our marketing efforts," Grazier said.
Australia and East Timor are aiming to agree the Greater Sunrise IUA before the end of the year. The other partner in Greater Sunrise is Osaka Gas Co. (J.OSG) with 10%.