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Exxon Unlikely to Make Scarborough Project Decision before 2H 2013

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MELBOURNE – A decision on whether to push ahead with the development of the Scarborough natural gas field off Australia's west coast is unlikely before the middle of next year, the Australia chairman of project operator ExxonMobil Corp. said Thursday.

"The challenge on Scarborough is finding a concept that is economically viable given the challenged nature of the resource," John Dashwood told reporters in Melbourne. "Right now, we're just trying to find a concept that works for us."

Mr. Dashwood said ExxonMobil is evaluating a number of different concepts for the Scarborough field, which it jointly owns with BHP Billiton. The field is located in 900 meters of water some 300 kilometers off Western Australia state in the Carnarvon Basin.

International energy companies are investing more than $175 billion to build around 10 liquefied natural gas projects on or near Australia's coastline, putting the country on track to overtake Qatar as the world's biggest exporter of LNG by the end of the decade.

However, Australia could face increasing competition from the U.S. – where overinvestment in tapping natural gas trapped in dense shale rock formations has driven down prices of the fuel domestically – and major new discoveries in East Africa. Several companies are considering export terminals in the U.S. that could target Asia's growing demand for energy.

"Any investment decision will involve an assessment of the attributes of the particular project being considered and how that lines up with what might be feasible out of the U.S. market," Mr. Dashwood said. "Competitiveness is the key."

Asked about the pressure facing Australia's refineries from new facilities being built in China and India that have made it difficult to compete on cost, Mr. Dashwood said ExxonMobil remained committed to its Altona refinery west of Melbourne.

"I understand that others have made some choices about not continuing to run some of their refineries here, but we have no plans to (do) anything but run the Altona refinery at this point," he said. "We keep making Altona as efficient and as good as player as it can be in this challenging market...We have been selective about the investments that we've made and made sure that we do that in a thoughtful way."

Caltex Australia in July said it plans to close its Kurnell facility in Sydney in the second half of 2014 and convert it to a fuel import terminal. Royal Dutch Shell this year moved to close its Clyde refinery in Sydney, also converting it into a dedicated fuel terminal. 

Copyright (c) 2012 Dow Jones & Company, Inc.

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