Woodside To Make Decision on Sunrise Project This Year

Lured by rising U.S. energy demand, Woodside Petroleum Ltd. is once again dusting off plans to develop its long-delayed Sunrise gas field in the Timor Sea.

Woodside hopes to begin design work this year for a multibillion dollar liquefied natural gas project at Sunrise, which could lead to the first shipments in 2009, a company spokesman told Dow Jones Newswires on Friday.

But Woodside still needs to sign up customers and choose between two conflicting development options that involve piping the gas to a Darwin LNG plant or building a floating LNG facility.

"We're looking to progress one of the options in 2004 to the design phase," a Woodside spokesman said. "We're in the market trying to secure new customers, and we have the capacity to be up and running by 2009/10," he added.

Royal Dutch/Shell Group and Woodside had backed the technically-ambitious floating LNG facility to focus on export markets, while partner ConocoPhillips and the Northern Territory government pushed for domestic sales using a pipeline.

The domestic option was dropped after a 2002 study found there were insufficient industrial users to justify the project. Sunrise is a joint venture between operator Woodside with 33.4%, ConocoPhillips with 30%, Royal Dutch/Shell with 26.6%, and Osaka Gas Co. with 10%.

ConocoPhillips, meanwhile, is also building a US$1.5 billion LNG plant at Darwin as part of its Bayu Undan project. Shipments to Japan are due to begin in the first half of 2006. That LNG facility may offer cost savings for Sunrise if it chooses to land its gas at Darwin via a 500km-long pipeline.

After a series of delays and joint venture disputes over the past few years, some analysts believe that Sunrise's prospects are again on the rise because of recent shifts in U.S. energy policy. Following an energy summit last month in Washington, the U.S. signaled a greater reliance on LNG imports, to shore up its own domestic gas supplies. Several firms, including Shell, Australia's BHP Billiton and Japan's Mitsubishi Corp. have proposed building LNG receiving terminals at US west coast locations stretching from Mexico to California.

U.S. energy secretary Spencer Abraham then visited Australia last week to talk with potential LNG suppliers. During a trade mission to the U.S. last month led by Western Australian premier Geoff Gallop, Woodside, ChevronTexaco Corp., BHP Billiton and Shell marketed Australian gas to U.S. officials.

"Certainly Sunrise is one of the gas resources being promoted to the U.S. government as a potential supply source for the West Coast," the Woodside spokesman said. "They (the U.S.) are looking outward at supply options and Australia is well placed to capture a significant share of that market," he said.

Shell Also Wants Sunrise To Proceed
As well as Sunrise, Woodside operates the North West Shelf project which exports 7.3 million metric tons per year of LNG mainly to Japan. It also operates the undeveloped Scott Reef-Brecknock fields offshore WA.

ChevronTexaco's proposed A$6 billion Gorgon development off the WA coast is considered one of the front runners to supply the emerging U.S. market. Gorgon has also signed a preliminary agreement with China, expected to lead to a major LNG export deal if Gorgon is approved for development.

Sunrise is also chasing markets in Asia. Japan's Osaka Gas owns 10% of the 7.7 trillion cubic feet field. "They (Osaka) are a potential buyer of Sunrise gas," the spokesman said. Shell, which is also promoting its share of Gorgon, is still eager to develop Sunrise, despite closing its Darwin office last year. "We're still committed to the development, but it can't take place until all the commercial aspects are satisfied," a Shell spokesman said. "We still believe that FLNG is the right solution for the project, but we are looking at all the options," he added. A ConocoPhillips spokesman declined to comment on that company's preferred development for Sunrise.

Sunrise is a joint venture between operator Woodside with 33.4%, ConocoPhillips with 30%, Royal Dutch/Shell Group with 26.6%, and Osaka Gas with 10%.

Gorgon is a joint venture between ChevronTexaco (4/7th interest and operator), Shell (2/7th) and Exxon Mobil (1/7th). Bayu Undan is owned by operator ConocoPhillips 56.72%, ENI 12.04%, Santos 10.64%, INPEX 10.52%, Tokyo Electric Power Company, Inc./Tokyo Gas Co. 10.08%.