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Origin, Conoco May Spend A$35 Billion on LNG Project

Bloomberg.com

By Angela Macdonald-Smith

April 8 (Bloomberg) — Origin Energy Ltd.and ConocoPhillips may spend about A$35 billion ($25 billion) on their planned liquefied natural gas project in Australia, the biggest of eight LNG ventures proposed for the Queensland coast.

The Australia Pacific LNG Ltd. project will operate four production units with output of as much as 14-16 million metric tons a year of LNG, the venture said in an e-mailed statement today. The state assured the project of an accelerated approval process.

BG Group Plc and Santos Ltd. are among other companies planning Queensland LNG plants aimed at meeting a forecast jump in Asian demand for cleaner-burning fuel. The proposals are being developed as mining companies including BHP Billiton Ltd., Rio Tinto Group and Anglo American Plc cut mining jobs in the state because of a drop in demand and prices for commodities.

The government “will do everything in its power to encourage an LNG industry and create jobs across Queensland, from our ports to the gas fields out west,” State Infrastructure and Planning Minister Stirling Hinchliffe said in a separate statement.

The project could create as many as 5,000 construction jobs and 1,000 permanent jobs at the coal-seam gas fields, processing units and export plant, Hinchliffe said. Queensland declared the venture “significant,” enabling it to undergo a streamlined environmental approval procedure.

‘Optimistic’ Timetable

Houston-based ConocoPhillips, the second-biggest U.S. oil refiner, agreed in September to pay as much as $8 billion for a 50 percent stake in the venture with Sydney-based Origin. It has Australia’s largest and most-developed coal-seam gas resource to supply the plant, Todd Creeger, Australia Pacific LNG project director, said in the statement.

Initial production may start in 2014 at a rate of 3.5 million tons a year, the Queensland government said. The investment will be made through 2020, according to Origin, which is also Australia’s second-biggest electricity and gas retailer. The venture is in talks for a site for the processing plant on Curtis Island at Gladstone port.

The 2014 timetable to start shipments is “highly optimistic,” Morgan Stanley said in an April 6 report. It estimated the partners, which each owns half of the venture, will spend A$18 billion on the first two LNG production units.

BG, a venture between Santos and Malaysia’s Petroliam Nasional Bhd., and Royal Dutch Shell Plc are among those also proposing to build LNG plants on Curtis Island based on coal- seam gas, which hasn’t previously been used as a fuel for export LNG. Liquefied Natural Gas Ltd. and Golar LNG Ltd. plan to build a smaller project at a different site at Gladstone, while Energy World Corp. is studying a project at Abbot Point further to the north.

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

Last Updated: April 8, 2009 02:55 EDT 

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