Japanese consortium to remain in talks on Natuna Gas stake
Japanese consortium to remain in talks on Natuna Gas stake
TOKYO (Dow Jones): A Japanese consortium of 11 companies will
continue with talks aimed at acquiring a 13 percent stake in
Indonesia's giant Natuna natural gas field, despite an
announcement Wednesday that exploration on the field will be
postponed, officials at the consortium told Dow Jones Newswires
yesterday.
"As the start-up of any liquefied natural gas project is
essentially based on the market situation and buyers' commitment,
we aren't surprised by the announcement of a postponement amid
the region's economic turmoil," said an official with Japan's
Indonesia Petroleum Ltd., or Inpex, the company leading the
Japanese consortium.
The consortium partners confirmed that they are still
interested in taking a stake in the project, both as a means to
secure LNG supplies beyond 2010 and to secure engineering and
production-sharing contracts for the $40 billion field
development.
"Even though the world LNG market is heading into a supply
glut given the financial difficulties in Asian countries, the
basic trend of shifting to cleaner energy sources such as natural
gas won't change," said the Inpex official.
As reported, Natuna project chairman Faisal Abda'oe, following
a meeting with President B.J. Habibie, announced Wednesday that
the Indonesian government had decided to postpone gas exploration
at Natuna.
Exxon Corp. (XON) is operator of the field, which has gas
reserves estimated at 46 trillion-cubic-feet and is in the
development stage. Exxon holds a 50 percent equity stake in the
project, Mobil Corp. (MOB) holds 26 percent, while Indonesian
state oil and gas company Pertamina holds 24 percent.
Abda'oe said Wednesday the decision was prompted both by the
economic downturn in Thailand - which was intended as the main
buyer of Natuna gas - and oversupply in the world market.
Thailand signed a memorandum of understanding with Pertamina
for purchase via pipeline of 500 million cubic feet a day of
Natuna gas starting in 2005, doubling to 1.0 billion cubic feet a
day in 2008.
"If possible, if the prospects are good in the future, maybe
it could be restarted in 2007," Abdaoe said.
"Restarting in 2007 sounds no problem (from the Japanese
side)," said a trading house official at one of the Japanese
consortium members.
The Natuna development has been dogged by controversy, since
the high carbon-dioxide content of the gas means it requires an
expensive cleaning process. That in turn has led to a struggle to
attract foreign buyers and financing.
President Habibie was a major supporter of the project while
he was Research and Technology Minister, seeing Natuna as a
solution to Indonesia's long-term fuel needs as the country's
crude oil production declines and imports become more expensive.
In a related development, analysts in Melbourne said
Australian would-be liquefied natural gas producers can take no
heart from Indonesia's decision Thursday to drastically delay its
Natuna LNG development.
Analysts said the delay underscores the terrible state of the
market.
Indeed, with Asia's LNG demand growth set to tumble in the
wake of the region's economic crisis, some analysts believe none
of Australia's proposed green fields developments will get up
before 2010. And even a brown field expansion at the country's
existing North West Shelf LNG project could be put back.
While the decision to delay Natuna cuts out from the market
another potential competitor for the Australian projects, Merrill
Lynch & Co. energy analyst Stuart Smith said that rather than
opening up an opportunity for Australian projects, the delay
highlights the current tough market conditions.
"It's indicative of a pretty weak LNG market," Smith said.
"Not doing (Natuna) doesn't open an opportunity (for
Australian producers) if there's no market," said Paul Ashby,
energy analyst at ABN Amro.
"I certainly don't believe there will be any green field
project in Australia...this side of 2010," Ashby said.
The list of proposed new LNG projects in Australia is headed
by the A$9 billion Gorgon project, situated adjacent to the North
West Shelf operation offshore of Western Australia. A joint
venture comprising Chevron Corp. (CHV), Texaco Inc. (TX), Mobil,
and the Royal/Dutch Shell Group (RD), Gorgon is targeted to be in
production by 2003, but needs to bed down some customers before
the partners will commit to it.
Then there's the Broken Hill Proprietary Co. (BHP) Philips
Petroleum (P) Bayu-Undan joint venture, in the Timor Sea. First
production had been expected in 2003, but has now been put back
to perhaps 2005 or 2006.
Finally Shell and Australia's Woodside Petroleum Ltd. (A.WPL)
have plans to build an LNG plant at Darwin, in the Northern
Territory, with first production targeted for 2004.