Shell's Sunrise Facility Approved

Woodside Petroleum has approved the controversial proposal by Shell to develop the Timor Sea gas resources via the world's first floating liquefied natural gas facility rather than bringing the gas onshore through a pipeline as originally planned. The decision is a blow to Phillips Petroleum, the other partner in the US $4.9 billion Greater Sunrise project, and to the Northern Territory government which has long hoped to use the energy reserves lying off its shores to develop an industrial base in Darwin.

Woodside, which as operator of Sunrise was asked last year to evaluate the competing proposals. The company went with Shell's plan because it was more economical. "The fundamental economics of a floating LNG facility at Sunrise are significantly better than bringing the gas to shore," said John Akehurst, managing director of Woodisde.

Phillips - which made no immediate comment on the decision - has pushed for a pipeline partly because this would enable it to share infrastructure with its Bayu Undan project, the first Timor Sea field being developed. Even if Phillips agrees to the Shell plan, however, the Australian government could refuse permission for a floating LNG facility. The Northern Territory, as well as the Australian gas industry, has been lobbying Canberra heavily to insist upon a pipeline.

Under Shell's proposal, the gas would be processed, liquefied and stored on the facility before being loaded on to tankers and exported without ever entering Australia.