Oil, gas majors float Scarborough plan
BHP Billiton and ExxonMobil could approve a new $US10 billion gas project in Australian waters as early as 2014, according to documents published on Tuesday.
The oil and gas majors released planning documents for their proposed Scarborough joint venture off the West Australian coast, and said a floating liquefied natural gas system was their preferred option for developing the resource.
Such technology is not operating in Australian waters, but is rapidly advancing, with Shell building what it says is the world's first floating liquefied natural gas hub for use in Australia's Prelude gasfield.
By processing the gas on board, the floating concept removes the need to build an onshore hub, avoiding many of the environmental and landowner issues that have plagued rival projects including Woodside's Browse gas venture.
Essentially a large ship, the infrastructure can be directly above offshore gasfields, and makes it viable to work in fields uneconomic to exploit from land.
It can also be disconnected and moved to another area once it has finished at a site.
In documents submitted to the federal environment department, Exxon and BHP said the floating platform would be 495 metres long and 75 metres wide, and would house the equipment needed for gas treatment, liquefaction and transfer into vessels that will ship the product to market.
Up to 600 people would work on board during commissioning, and once operating the workforce is planned to be closer to 200.
The two companies said the first wells at Scarborough were likely to be drilled in 2018 and 2019, and production would begin in 2020 at the earliest.
"The Scarborough gasfield has an expected producing life of approximately 25 to 35 years," the companies wrote in their submission to the environment department.
The platform would be about 220 kilometres from WA's Ningaloo Reef, but the companies insisted there was unlikely to be significant impacts on the reef, nor the whales and turtles that pass through.
While the two companies will continue to investigate other options for the development of Scarborough, public confirmation that a floating liquefied natural gas system is the preferred option is a blow to Woodside Petroleum, which has been trying to source extra gas from third parties to warrant building another processing unit at its Pluto LNG hub.
Scarborough's proximity to Pluto meant the field had been considered a candidate to help Woodside build volume through its plant.
The revelation that a final investment decision could be less than two years away comes at a time when BHP is cutting costs and seemingly averse to major new spending decisions.
It also highlights how quickly Scarborough has risen in BHP's estimations, given that this time last year its biggest project priorities were its three "mega projects": the Olympic Dam expansion in South Australia, the outer harbour at Port Hedland, and the Jansen Potash project in Canada. It chose to defer all of them indefinitely in mid-2012.
BHP shares closed 4¢ lower at $32.72
Frequently Asked Questions about this Article…
Scarborough is an offshore gas development off the West Australian coast being advanced as a joint venture by BHP Billiton and ExxonMobil. The partners have released planning documents outlining a possible development of the field.
BHP and ExxonMobil have identified a floating liquefied natural gas (FLNG) system as their preferred development option. The FLNG concept processes gas on board a large vessel, removing the need for an onshore processing hub and avoiding many landowner and onshore environmental issues.
The companies put the potential cost at about US$10 billion, and planning documents indicated a final investment decision could be made as early as 2014.
According to the submission, the first wells were likely to be drilled in 2018 and 2019, with production potentially beginning in 2020 at the earliest. The Scarborough gasfield is expected to have a producing life of roughly 25 to 35 years.
The proposed floating platform would sit offshore about 220 kilometres from WA's Ningaloo Reef. Documents describe a vessel roughly 495 metres long and 75 metres wide that would house gas treatment, liquefaction and transfer equipment.
BHP and ExxonMobil told the federal environment department they believe the platform is unlikely to cause significant impacts to Ningaloo Reef or to whales and turtles that pass through the area. The companies said they will continue environmental assessments as part of the approval process.
Public confirmation that FLNG is the preferred option for Scarborough is a setback for Woodside Petroleum. Scarborough’s proximity to the Pluto LNG hub had made the field a candidate to supply extra gas to help justify expanded processing at Pluto, but the FLNG route would make that less likely.
Investors should note the project’s scale and timing: a possible US$10 billion development with early investment decisions signalled despite BHP’s recent cost-cutting stance. The article also notes BHP shares closed slightly lower on the news (down 4 cents to $32.72), indicating market sensitivity to project announcements and capital-spending signals.
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