Conoco Says Australia Could Be Biggest LNG Exporter

DARWIN (Dow Jones Newswires), Sept. 10, 2009

Australia could become the world's biggest exporter of liquefied natural gas, or LNG, by 2020, the head of ConocoPhillips' (COP) Australian unit said Thursday.

The comments came as Chevron Corp. (CVX) said it has signed three binding sales agreements to supply nearly three million tons a year of LNG from the proposed Gorgon project in Western Australia state to Japanese and Korean energy companies.

ConocoPhillips Australia President Joseph Marushack said that a final investment decision is still expected to be made for its massive Gladstone LNG joint venture in Queensland state with Origin Energy Ltd. (ORG.AU) by the end of 2010, with first gas to be shipped in 2014.

"Australia is ideally positioned to become a really dominant supplier," Marushack told an oil and gas conference.

"Today it's the world's sixth-largest supplier. In 10 years it could rank second, maybe first."

Qatar ranked first among LNG exporters in 2008, shipping 39.68 billion cubic meters, according to BP PLC's Statistical Review of World Energy. Malaysia, Nigeria, Indonesia and Algeria also exported more than Australia's 20.24 billion cubic meters of LNG last year.

ConocoPhillips' forecast isn't surprising as there are over a dozen LNG projects slated for startup in Australia and Papua New Guinea by 2016. There is some contention among market watchers whether Australia will be able to leapfrog Qatar, which is also adding more LNG production capacity.

Many analysts doubt that all of the Australian projects will be built, so Marushack's comments suggest the company has a positive outlook for its own Australian project and for others in the region.

The Chevron operated Gorgon project recently won the approval of the Australian government and analysts expect Chevron and its partners to make a final investment decision within a month.

Woodside Petroleum Ltd's (WPL.AU) Pluto LNG project, which is about three quarter complete and due to ship first gas by late 2010, has been earmarked for expansion to three production trains by 2013.

In a statement, Chevron said Japan's Osaka Gas Co. Ltd. (9532.TO) will buy 1.375 million metric tons annually, or mtpa, of LNG from Gorgon from the second half of 2014 for 25 years, with Tokyo Gas Co. Ltd. (9531.TO) agreeing to purchase 1.1 mtpa over the same period.

Subject to Australian foreign investment approval, Osaka Gas will acquire a 1.25% interest in Gorgon and Tokyo Gas a 1% stake.

Chevron has also agreed to supply its 50%-owned GS Caltex Corp. of Korea with 0.5 mtpa of LNG from Gorgon and other Chevron gas projects.

Also Thursday, an executive from Japan-based Inpex Holdings Inc.'s (1605.TO) Australian unit said that its Ichthys LNG joint venture with France's Total SA (TOT) at Darwin is planning to ship first gas in 2015 after making a final investment decision in 2010.

Inpex General Manager Darwin Sean Kildare said the joint venture will release an environmental impact statement for the project shortly, with an eight-week public consultation process to commence before Christmas.

Earlier, the chief minister of Australia's Northern Territory, Paul Henderson, said a final investment decision on the project, which he said is worth more than US $20 billion, is expected in late 2010.

Kildare said Inpex is aware that Japanese utilities are "premium" gas buyers, when asked about the progress of customer negotiations for the Ichthys project.

ConocoPhillip's Marushack said that aside from the impact of the global financial crisis, U.S. gas prices have been pushed down due to a flooding of the domestic market with local unconventional sources of gas.

But "over time", demand for LNG from all parts of the globe will be robust, and demand for LNG from the Asia Pacific region will be "very strong" when the global financial crisis abates, he said.

Australia is well placed to service the Asia Pacific market geographically and has a stable political environment that encourages the development of LNG projects.

ConocoPhillips and Origin are competing with four other ventures to convert an unconventional source of gas, coal seam gas, into LNG at the port town of Gladstone. In contrast, Inpex's project and many others plan to use conventional natural gas.

ConocoPhillip's Marushack said "coordination" is expected to occur between the Gladstone projects, but he declined to predict whether there will be any project consolidation.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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