Bayu-Undan LPG project postponed

Bayu-Undan LPG project postponed

MELBOURNE (Dow Jones): The Bayu-Undan liquefied petroleum gas and condensate project in the Timor Sea is to be postponed in the wake of political and commodity price uncertainty, Australian oil and gas company Petroz NL said Wednesday.

The lead partners in the project, U.S.-based Phillips Petroleum Co. (P) and Australia's Broken Hill Proprietary Co. (BHP), had been expected to make a development decision in the first quarter of 1999, allowing production to start in 2002. But in a statement junior partner Petroz said that development decision will now be postponed until later in the year.

Bayu-Undan is situated in the so-called Zone of Cooperation, an area of the Timor Sea jointly administered by Australia and Indonesia. The future administration of the area has been called into question by the prospect of greater autonomy or independence for East Timor, the Indonesian province that borders the Timor Sea.

Production of the project is targeted to peak around 110,000 barrels a day of liquefied petroleum gas and condensate.

A majority of the seven participants in the project, including Petroz, want the development to proceed on schedule, subject to outstanding taxation issues being resolved between Australia and Indonesia, but the other participants have forced a delay, Petroz said.

"Some participants feel that, in view of the uncertainties relating to current commodity prices and the political situation, it would be preferable to delay commitment until the situation was clearer," Petroz said.

Petroz now doesn't expect the project to start production until 2003, managing director Rod Brown told Dow Jones Newswires.

"Most of the parties believe the project, under the current treaty or guidelines, will go ahead and it will remain robust," he said.

"It will make a very good contribution to (our) cash flow and profit," he said.

A spokesman for BHP said the project is being delayed pending clarification of those taxation issues.

"There're quite a few commercial and taxation issues that need to be clarified," the spokesman said.