Bloomberg: Exxon Project May Lead Australian Region LNG, JPMorgan Says

 By Angela Macdonald-Smith

Nov. 16 (Bloomberg) — Exxon Mobil Corp.’s proposed liquefied natural gas project in Papua New Guinea may beat rival ventures in the Australian region to production given its economics and unity between partners, JPMorgan Chase & Co. said.

Exxon’s project has fewer hurdles to overcome than competing projects led by Woodside Petroleum Ltd., Chevron Corp., Inpex Holdings Inc. and Santos Ltd., the bank said in a Nov. 13 report. All the proposed 66 million metric tons-a-year of LNG projects in Australia and Papua New Guinea won’t proceed within the suggested 2015 timeframe due to market and resource constraints, it said.

Australia has two operating LNG ventures, with another in construction and as many as eight more proposed, as companies seek to tap rising demand in north Asia for cleaner-burning fuels for power generation. The Exxon venture, which includes Oil Search Ltd. and Santos, is due to decide by about the year-end whether to start designing the $10 billion project.

“While tightness in the current LNG market is clear, there is also an abundance of proposed new LNG projects,” Sydney-based JPMorgan analysts led by Mark Greenwood said in the report. “We have high confidence that PNG LNG will proceed given its robust economics, JV partner alignment and government support.”

Demand for LNG may more than double by 2015 to 380 million metric tons a year, Perth-based Woodside, operator of the North West Shelf venture and of the Pluto LNG project under construction in Western Australia, said yesterday. Woodside Chief Executive Officer Don Voelte said yesterday the company aims to add a new LNG production unit every two years after the first Pluto unit starts up at the end of 2010.

Pluto, Sunrise

Woodside’s plans for a subsequent expansion of Pluto, and its undeveloped Sunrise project in the Timor Sea, are probably the next most-likely projects to proceed, JPMorgan said in the report. Royal Dutch Shell Plc, a 34 percent shareholder in Woodside, ConocoPhillips and Osaka Gas Co. have stakes in Sunrise.

Chevron Corp.’s delayed Gorgon LNG project may be the next to proceed, followed by Inpex’s Ichthys project and the Woodside- led Browse venture, JPMorgan said. Santos’s Gladstone project, which will use coal seam gas as a fuel, the Scarborough project involving BHP Billiton Ltd. and Exxon, and the Caldita/Barossa project involving Santos and ConocoPhillips are classified as “low confidence/longer-term” projects in the report.

Woodside yesterday said it was considering developing the Sunrise field, which lies in waters partly administered by East Timor, as a floating LNG project and suggested it would be developed after the first two production units at Browse.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it’s turned back into gas for distribution to power plants, factories and households.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: November 16, 2007 01:18 EST

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