BHP rules out Indonesia as site for its LNG plant

BHP rules out Indonesia as site for its LNG plant

SYDNEY (Reuter): The Broken Hill Pty Co Ltd (BHP) said yesterday it has not yet decided on the location of a proposed liquefied natural gas (LNG) plant, but has ruled out Indonesia as a site.

BHP and U.S. oil group Phillips Petroleum Co are looking to develop a LNG plant, estimated to cost about A$4 billion.

The two are studying plans for a facility in the northern Australian city of Darwin, or offshore in the Timor Sea.

"The onshore Indonesia project, the Indonesians would like to do. But we believe it is not commercially viable and the other two we are currently evaluating jointly with Phillips," BHP Petroleum acting chief executive Philip Aiken told Reuters.

Aiken, who took over the division last month after the resignation of John O'Connor, said BHP and Phillips will make a decision on the project by the end of calendar 1997 and that there was no political pressure on the outcome.

"My attitude is, you work out what is the best commercial project and then you have to take on the political issues later and there are political issues in Australia and Indonesia," Aiken said after giving a speech to a conference.

BHP is a strong supporter of the offshore plant located at the Bayu-Undan gas field in the Timor Sea, as the Australian oil, steel and copper giant had developed a process called 'compact LNG' which was suitable for offshore facilities.

"We are very keen to commercialize that (compact LNG), we think it is a very viable process," said Aiken, who joined BHP in April as executive general manager, corporate development, a position he still holds.

Bayu-Undan, which is estimated to contain proven and probable gas reserves of 3.1 trillion cubic feet of gas and about 400 million barrels of hydrocarbon liquids, will require A$1 billion on facilities expenditure for initial output in 1998.

The BHP/Phillips consortium plans a plant with capacity of up to three million tons per year and a production start of around 2003.

But this is dwarfed by a rival 7.5 million tons per year onshore project headed by Woodside Petroleum Ltd and Royal Dutch/Shell.

However, Aiken said the development of the LNG plant did not mean BHP was now becoming more focused on gas rather than oil.

"In Australia we have huge natural gas reserves, but overseas our exploration is both gas and oil," Aiken said.

"Oil is still the preferred exploration strategy," he said. Aiken gave a speech to the Australian Institute of Management, on 'competing in Asia.' BHP is one of Australia's largest investors in the region, which makes up 28 percent of the group's sales.

However, he saw no effect from the current currency and financial crisis in southeast Asia on BHP operations.

He said most of BHP's operations in Asia were based on U.S.- denominated contracts.

"In the Asian markets we are not seeing any effect on our business at all. Obviously we watch it with great interest because it is a very volatile situation," Aiken said.

Aiken most of BHP's investments in Asia are long term. "We haven't changed our attitude to Asia at all," he said. Sydney newsroom 61-2 9373 1800