BHP, Timor partner lock horns over Timor project

BHP, Timor partner lock horns over Timor project

SYDNEY, Australia (AP): A rift between BHP and U.S.-based Phillips Petroleum is delaying their joint development of the massive Bayu-Undan gas fields in the Timor Sea off Darwin.

The US$2.22 billion-plus (above A$3 billion) Liquefied Natural Gas (LNG) project now appears to be drifting as BHP Petroleum and Phillips each remain convinced of their own development options for the project.

BHP wants to test its unique offshore production technology while Phillips remains fixed on its plan for a massive onshore project near Darwin.

Phillips also noted it has now opened discussions with Woodside Petroleum and Shell over a possible joint LNG development at Darwin.

Woodside and Shell stole the march on the Bayu-Undan participants earlier this year when they announced a feasibility study into a $7.4 billion (A$10 billion) onshore LNG project at Darwin to develop their own gas fields in the Timor Sea.

Woodside and Shell announced at the time that they would speak to all Timor Sea participants in the Timor to gauge the potential for future joint developments.

BHP and Phillips are the major players in a nine-member consortium proposing to develop the Bayu-Undan fields.

While the first phase of the project has been approved -- the production of liquids from the field is expected to start next year -- the larger LNG development remains stalled.

"Clearly frustration is building among the joint venturers about the lack of agreement," said Peter Best, energy analyst with Macquarie Equities.

Approval of either onshore or offshore development had originally been expected months ago but Phillips said there is now no deadline for final agreement on talks.

"I think there is concern among all the joint venture partners that the longer we take to make a decision the further behind Bayu-Undan gets," said Jim Godlove, Darwin area manager for Phillips.

Godlove said Phillips favors a single LNG production site in joint venture with Shell and Woodside with a capacity of up to 9 million metric tons of LNG per annum, compared with a 3 million ton-a-year plant originally envisaged for the Bayu-Undan project.

"We will hopefully work with them to develop a single location," he said.

He said individual discussions with Shell and Woodside had started about a month ago and were continuing.

A spokesman for BHP said the company was hopeful that a development proposal would be accepted before the end of the year.