Month in Petroleum: July 2010 - LNG

Gorgon, Wheatstone on the warpath

With a whole spree of drilling success behind it, it is unsurprising that Chevron has taken a bullish view towards its Gorgon and Wheatstone projects in the Carnarvon Basin off northwestern Australia.

This was first demonstrated by the company’s apparent confidence in its Wheatstone project, which the supermajor now expects to be an initial two-train development capable of producing 10 million tonnes of LNG per annum – up from the original 8.6MMtpa – using feedstock sourced from the Wheatstone and Iago fields, according to its environmental assessment.

While this contrasts with its second quarter report, which stuck with the original figure, Chevron’s enthusiasm is unsurprising when taken against the backdrop of back-to-back successes, the two most recent being the Sappho-1 exploration well in WA-393-P and the Clio-3 discovery in WA-205-P.

Sappho-1 intersected about 75m of net gas pay while Clio-3, the third discovery on the Clio structure, penetrated 79m of net gas pay.

Further progress on Wheatstone was made when Chevron signed a native title heads of agreement with the Thalanyji people for the project’s site about 12km south of Onslow.

The agreement covers about 500 hectares for the Wheatstone plant site and port facility, plus additional land for the access corridor, accommodation camp, domestic gas pipeline corridor and other project-related requirements.

Chevron said the area is large enough for up to five LNG trains with total capacity of 25MMtpa.

More recently, the company said in early August that, having secured about 80% of the LNG offtake from the first and second trains at Wheatstone, it was confident of moving ahead with the project. It added it was now confident it had enough gas for a fourth LNG train at Gorgon.

Bears pull down Pluto expansion

Meanwhile, Woodside Petroleum appears to be scrambling to firm up the reserves it needs to make final investment decisions for its Pluto expansion plans.

Unlike Chevron, its exploration drilling campaign has thus far failed to support its expansion plans, despite making four gas discoveries out of the nine wells drilled.

This was reinforced by Woodside’s reluctance to commit to the projects in its quarterly report, saying while front-end engineering and design studies for Pluto Train 2 and Train 3 were progressing to plan, FID remained “contingent on identification of economically viable gas resources, either through exploration volumes and/or other resource owners”.

Despite this, the company remains hopeful that its ongoing drilling – expected to ramp up with the arrival of the Ocean America – could prove up the gas it needs.

Progress on the first LNG train at Pluto also remains on track, with the last of 264 modules for the onshore plant arriving from Thailand during the last quarter and the project reaching 91% completion as of the end of June.

Hook-up and commissioning work on the Pluto offshore platform is expected to be completed by the end of the year.

CSG-LNG faces delays

Over in the east, two of the planned coal seam gas to LNG projects may see their deadlines for FID pushed back after federal Environment Minister Peter Garrett deferred making a decision on their environmental impact statements until October 11, more than a month after the Australian election on August 21.

The minister is believed to have asked BG Group and Santos for more information on water management plans, the effects their respective projects would have on groundwater as well as potential impacts on the Great Barrier Reef World Heritage Area, in which Gladstone sits.

Despite this, BG said the delay would not push its Queensland Curtis LNG project outside the limits of its previously announced deadline of later in 2010 for FID.

The delay was criticised by the federal opposition, which alleged Garrett had the environmental protection process for the two projects and called for his resignation.

Arrow acquisition gets green light

Meanwhile, CS CSG, the joint venture between Shell and PetroChina, had its $3.5 billion acquisition of Arrow Energy approved by the Federal Court of Australia, giving it Arrow’s Queensland coal seam gas assets and domestic power business.

These and Shell’s CSG assets will underpin Shell’s plans for a development of up to four LNG trains, each capable of producing 4MMtpa of LNG, on Curtis Island.

The approval also comes as Shell is reported to be eyeing a strategic stake in Santos’ Gladstone LNG project, putting it in competition with Korea Gas and Sinopec.

This is seen as a possible opening move towards a merger with its CS CSG, giving the combined projects a far greater asset base and a potential customer in CS CSG partner PetroChina.

Inpex raising Ichthys funds, files EIS

Also moving forward is Japan’s Inpex, which is raising up to 520 billion yen ($A6.6 billion) and has filed the draft environmental impact statement for its 8.4 million tonne per annum Ichthys LNG project in the Browse Basin.

The funds will be raised through a global share offering, which prices Inpex’s shares at 417,000 yen each.

Most of the funds would be used for Ichthys, which the company is planning to make a final investment decision on by the fourth quarter of next year.

Meanwhile, the company said the release of the draft EIS demonstrated the project could be developed in an environmentally and socially sustainable manner while delivering economic benefits to the Australian and Northern Territory communities.

“Economic modelling for the Ichthys project indicates the Australian economy will benefit by an estimated $A3.5 billion annually. This includes an expansion of the Northern Territory economy by an average of nearly 18% annually,” Inpex Browse managing director Seiya Ito said.

The EIS applies to all aspects of the proposed project including the offshore processing facilities at the Ichthys field in the Browse Basin, the subsea gas pipeline to Darwin and the onshore LNG plant in Darwin.

Prelude named in Shell offtake deal

Also in the Browse, Shell said a binding sales and purchase agreement for the supply of 800,000 tonnes of LNG per annum to Japan’s Osaka Gas would include gas from its Prelude floating LNG project as well as its share of gas from Gorgon once they came onstream.

This is the first time Prelude, which includes developing the Prelude and Concerto fields in Shell’s wholly owned WA-371-P permit, has been included in a supply deal.

A final investment decision for the project is scheduled for early next year with first gas expected in 2016.

Beach voices LNG ambitions

Last, but not least, Cooper Basin stalwart Beach Energy has signed a memorandum of understanding with Japan’s Itochu Corporation to look into a possible liquefied natural gas project.

While Beach does not yet have the resources for such a project, the company is preparing an exploration program targeting shale gas and coal seam gas in the Cooper Basin.

The company has been especially keen on its shale gas potential and has said the Cooper has the potential to hold many tens of trillion cubic feet in shale gas.

It plans to start its shale gas play with a two-well exploration program in PEL 218 from mid to late August.

 
Monday, 9 August 2010
PetroleumNews.net

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