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THE NEW YORK TIMES: Exxon Says Gorgon Decision May Be Delayed Into 2007

Exxon Says Gorgon Decision May Be Delayed Into 2007

By REUTERS
Published: May 8, 2006

Filed at 3:00 a.m. ET

GOLD COAST, Australia (Reuters) – Oil and gas producer ExxonMobil (XOM.N) said on Monday a final investment decision on its Gorgon liquefied natural gas (LNG) joint-venture in Australia could be delayed into 2007 because of increasing costs.

ExxonMobil Australia chairman Mark Nolan told reporters at an energy conference the delay would not necessarily put back first production from the field, which claims certified gas reserves of 12.9 trillion cubic feet, currently scheduled for 2010.

“There is an expectation among project partners that a final investment decision may flow into next year,'' he told a news conference. “There needs to be certainty about the cost before a financial investment decision can be made.''

ExxonMobil has a 25 percent stake in Gorgon, which is operated by Chevron (CVX.N) with 50 percent. Royal Dutch Shell Plc (RDSa.L) holds the other 25 percent.

Chevron has already tied up most of its Gorgon LNG in long-term contracts with Japanese customers while Shell is thought to have sold its share into the North American market.

Nolan said ExxonMobil, which has been linked with sales to India and China, was continuing to market its share of the project's LNG.

GIPPSLAND GAS

Nolan was speaking at the delivery of a new study into the economic benefits of oil and gas production in the Gippsland Basin in the Bass Strait offshore Australia's Victoria state.

Gippsland has contributed A$2.2 billion ($1.7 billion) a year to Australian gross domestic product over the past four decades and accounts for 63 percent of the country's cumulative oil production and 28 percent of its gas output, said the study by economic modeling group Econtech.

“Bass Strait still has a long-term future,'' Nolan told reporters. “There is significant oil supply and approximately 7 trillion cubic feet of gas reserves remaining in the basin.''

U.S.-based ExxonMobil has a 50 percent stake in the Bass Strait oil and gas fields, which it operates. The balance is held by BHP Billiton (BHP.AX)(BLT.L).

Nolan said gas from the field, which he sees best diverted to baseload electricity generation in Australia, could continue producing for decades, but that existing oil fields were in decline and did not have lives exceeding one to two decades.

Gippsland oil production now stands at 70,000 barrels of oil per day (bpd) and is expected to decline at 20 percent a year, though improved recovery techniques might slow the pace, Nolan said. Production from the Bass Strait oil fields peaked at around 550,000 bpd in the mid 1980s.

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