East Timor Makes New Pitch on Stalled Woodside Gas Project
PERTH, Aug 30 (Reuters) - East Timor is offering to invest $800 million to build a pipeline to take gas from the Timor Sea to the tiny nation, as it makes a new pitch to resolve a dispute with Australia's Woodside Petroleum over how to develop huge fields in the area.
East Timor has insisted for a decade that a liquefied natural gas plant to process gas from the Greater Sunrise fields should be built on its shores, bringing with it much-needed development. Woodside says the plan is uneconomical and wants to use a floating LNG plant.
Industry insiders say the chance of a near-term breakthrough remains slim, despite the new gambit. That is partly because East Timor also wants to unpick a revenue-sharing agreement after accusing Australia of engaging in espionage when the treaty was struck.
Australia will not confirm or deny the allegations, but has said the accusation is not new.
East Timor has filed for arbitration and if it overturns the treaty, it could open up discussions on a disputed maritime border, risking further delays to the project.
East Timor Secretary of State for Natural Resources Alfredo Pires said Dili is prepared to invest $800 million in a pipeline to help move things forward, using funds from its $14 billion Petroleum Fund.
"It's an indication of our willingness to take on some of the risks of the project," Pires said by telephone, adding it would be a commercial investment and could return around 7 percent, above the 2 to 3 percent the fund is currently seeing.
Soaring costs and the prospect of competition from U.S. shale gas to supply Asia customers have already threatened the future of a number of LNG projects around Australia.
Woodside has previously estimated that an onshore plant in East Timor would add as much as $5 billion to analysts' $12 billion cost forecast to develop the fields using floating LNG.
East Timor says a project using an onshore plant would cost $12-$13 billion and that floating LNG faces a greater risk of cost blowouts because it is a new technology.
Woodside declined to comment on Pires' offer to invest in a pipeline, pointing to an earlier statement from the firm that it remained committed to developing Greater Sunrise.
"We value our relationships with the Timor-Leste (East Timor) and Australian governments, and seek tripartite alignment to allow the timely development of this resource for the benefit of all stakeholders."
CLOSING WINDOW
Six months ago, Woodside said there could be a window of opportunity for a decision to develop the project in 2013 and analysts still saw the project coming online in 2018.
But in a recent speech to investors arranged by UBS Woodside's chief Peter Coleman showcased its most prospective projects and Sunrise was the only big development not mentioned.
"There is logic to the fact that it wasn't mentioned and therefore in their eyes it ranks behind a lot of the other projects they have on their slate," John Hirjee, an analyst with Deutsche Bank in Melbourne said.
At its results briefing last week, Woodside put Sunrise at the end of a list of around 10 developments, with initial design work for the project beginning of 2016.
In the last year, Woodside has cast a wide net for new projects, committing to buying a 30 percent stake in Israel's Leviathan gas development, joining an exploration venture with South Korea's Daewoo International Corp in Myanmar, and buying into a project in Ireland.
Woodside has already invested several hundreds of millions of dollars in drilling exploration at Sunrise but some analysts doubt it will spend more.
"Woodside's not going to spend another dollar on it," said Peter Strachan, an analyst with Stock Analysis in Perth.
ALTERNATIVES
East Timor's insistence on bringing gas to shore has bewildered some industry watchers who say that the benefits of an onshore site would be marginal for fields estimated to contain more than 5 trillion cubic feet of gas.
"From a strictly financial point of view, it's hard for us to understand why the government is so determined to bring the pipeline here," Charles Scheiner, a researcher with La'o Hamutuk, an independent Dili-based research firm.
But an onshore plant has become a unifying cause in Asia's youngest nation, with consensus across political parties.
In past years, East Timor has threatened to pursue other development partners, such as Malaysia's state oil firm Petronas, and Pires says that there remains plenty of interest.
"We'll have no shortage of interest if anyone wants to leave. There will be others who will jump in," Pires said.
(Editing by Ed Davies)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Rooftop Solar Now 4th Largest Source of Electricity in Australia
- US Confirms Reimposition of Oil Sanctions against Venezuela
- EU, Industry Players Ink Charter to Meet Solar Energy Targets
- Analyst Says USA Influence on Middle East Seems to be Fading
- Russian Ships to Remain Banned from US Ports
- Brazil Court Reinstates Petrobras Chair to Divided Board
- EIB Lends $425.7 Million for Thuringia's Grid Upgrades
- Var Energi Confirms Oil Discovery in Ringhorne
- Seatrium, Shell Strengthen Floating Production Systems Collaboration
- An Already Bad Situation in the Red Sea Just Got Worse
- What's Next for Oil? Analysts Weigh In After Iran's Attack
- USA Regional Banks Dramatically Step Up Loans to Oil and Gas
- EIA Raises WTI Oil Price Forecasts
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Venezuela Authorities Arrest Two Senior Energy Officials
- Namibia Expects FID on Potential Major Oil Discovery by Yearend
- Oil Markets Were Already Positioned for Iran Attack
- Is The Iran Nuclear Deal Revival Project Dead?
- Petrobras Chairman Suspended
- Oil and Gas Executives Predict WTI Oil Price
- An Already Bad Situation in the Red Sea Just Got Worse
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil and Gas Execs Reveal Where They See Henry Hub Price Heading
- Equinor Makes Discovery in North Sea
- Macquarie Strategists Warn of Large Oil Price Correction
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Standard Chartered Reiterates $94 Brent Call
- Chevron, Hess Confident Embattled Merger Will Close Mid-2024
- Analysts Flag 'Remarkable Feature' of 2024 Oil Price Rally