$5b gas deal opens new era

Business Asia, March 17, 2000

A proposal for a A$5 billion Darwin-based synthesis gas generation project could be the catalyst for harnessing the vast natural gas resources of the Timor Sea, according to the Northern Territory's Minister for Resource Development Daryl Manzie.

He was commenting on this month's announcement by Woodside, Shell and the Methanex Corporation of Canada regarding a plan to develop a syngas facility near Darwin.

The concept paves the way for Darwin to become a base for a major new energy province and could lead to other ventures by the Northern Australia Gas Venture (NAGV), which will supply the gas.

Manzie said the syngas project "would bring Timor Sea gas ashore to Darwin, thereby kick-starting the development of a new gas-based energy industry for the Northern Territory".

"Natural gas from the Timor Sea would be available for power generation, for fuelling new industrial developments and for piping to interstate markets. It could also be the first step towards the future development of a liquefied natural gas (LNG) export project when overseas LNG markets recover."

Syngas is produced from steam-reformed natural gas and carbon dioxide. It is used as a feedstock for a variety of chemicals and fuels. Methanex is considering a number of product options for its proposed Darwin plant, including methanol, hydrogen and gas-to-liquids.

The proposed development would involve a total investment of A$5 billion in offshore and onshore gas production and processing facilities, pipelines, petrochemical facilities and other customer developments.

In addition, the deal envisages the piping of natural gas to the Nabalco alumina refinery at Gove and gas supply to the Northern Territory Power and Water Authority (PAWA) for power generation.

Development is subject to a number of conditions, including verification of the available gas reserves, receiving the necessary regulatory approvals, including the relevant environmental, heritage and Native Title approvals, and receiving infrastructure and other support from the Federal Government.

"Methanex is the global leader in methanol production and marketing and their interest in locating their next major development project in Darwin is most welcome," Manzie said.

"(The) announcement recognises Darwin's strategic location and helps to confirm its role as an increasingly important trading hub between Australia and the dynamic markets of South East Asia."

Manzie noted that further work needed to be undertaken ahead of a formal commitment by the three companies to invest in the Territory. This included the finalisation of negotiations with Nabalco and PAWA for the supply of Timor Sea gas.

A final decision on the project is expected in 2002 and start-up of the syngas facility is targeted for 2005.

Under the agreement, Shell and Woodside, equal partners in the NAGV, would supply about 110 petajoules of natural gas a year for the syngas generation facility.

NAGV would construct a A$2.5 billion offshore gas production facility in the Timor Sea and a 500km pipeline to Darwin.

Last October, Phillips Petroleum, as 50.3 per cent stakeholder and operator, announced on behalf of venture partners plans to proceed with a first stage of the US$1.4 billion Bayu-Undan offshore gas and liquids project in the Timor Sea, with land support based at Darwin.

This project plans to strip condensate and LPG gas from Bayu-Undan's offshore natural gas resources in the Timor Sea before re-injecting the dry gas.

Phillips also is investigating a plan to distribute natural gas to Darwin and northern Australia and establishing an LNG plant at Darwin.