Solution found for Kipper

OIL company ExxonMobil says it knows how to fix a mercury contamination problem that has delayed production and blown out costs at a large gas project in Bass Strait.

OIL company ExxonMobil says it knows how to fix a mercury contamination problem that has delayed production and blown out costs at a large gas project in Bass Strait.

It said it was poised to make a decision on which of several solutions best fits the Kipper field, which ExxonMobil operates as a joint venture with BHP Billiton and Santos.

Kipper is one of three fields being refurbished and developed under the Kipper Tuna and Turrum project, which had a 63 per cent cost blowout in 2011 after engineering problems and the discovery of mercury contamination in the gas.

The project is now priced at $4.4 billion and while project installation manager Peter Baker could not give a schedule for when the mercury contamination would be resolved he said his team had multiple solutions.

"There are many ways you can do it," he said. "There has been a huge amount of engineering done to decide what is needed to remove that mercury to a satisfactory level and our engineering people are honing in on that. They are not far away from the decision on what would need to be done and how to do it."

While he would not reveal the methods under consideration, Mr Baker said the team would soon select the best option for removing the mercury and then move to the front-end engineering and design stage.

Despite the cost and schedule of the mercury solution remaining a mystery, Mr Baker said the KTT project's budget of $4.4 billion would be able to contain the costs.

Nor would the 2013 deadline for first production from the KTT project be missed, he said, given the Turrum field would be supplying gas even if Kipper continued to struggle.

By harvesting gas from old oilfields, the project is indicative of Bass Strait's evolution from being Australia's prime oil production province to becoming a big player in the supply of natural gas to customers on the east coast.

The decline of Bass Strait's oil stocks has been well documented for many years, but Mr Baker said the vast potential for the region's gas meant reports of its demise were premature.

"Bass Strait has been around [as an oil and gas province] since 1965 and it is going to be around for another similar time frame," he said. "It's huge and as the reservoir technology becomes more sophisticated and they pick up new zones they want to go and look at, there are lots of smaller opportunities that will come into play."

A virtual doubling of ExxonMobil's Marlin rig is close to complete, with a 60-metre bridge now connecting the existing rig to the new Marlin B rig, which is needed to house the equipment to harvest for gas rather than oil.

Production of natural gas will soon be more lucrative for companies like ExxonMobil, BHP Billiton and Santos, with domestic customers to be forced to match the higher prices charged for export gas.

ExxonMobil discovered two new prospective fields in Bass Strait South East Longtom and South East Remora in 2010, but has never revealed their size and will only say that they are under continued evaluation.

Asked if there could be any new greenfield developments in Bass Strait, Mr Baker said: "I hope so."

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