Phillips consoders Indonesian gas plant

Phillips consoders Indonesian gas plant

PERTH (Reuters): Phillips Petroleum Co has completed a study into building a liquefied natural gas (LNG) plant on Indonesia's Timor island as an alternative to a offshore plant or one in Australia.

"The study has just been completed and will be submitted to the Indonesian government," a spokesman for the United States- based company told Reuters yesterday.

The study follows long-running differences between Phillips and joint venture partner The Broken Hill Pty Co Ltd over where to build a plant.

BHP petroleum division chief executive Philip Aiken last month said BHP has ruled out Indonesia as a site.

Phillips and BHP have been evaluating separate proposals to construct facilities to process into LNG raw gas from the giant Bayu-Undan field within the Australian/Indonesian Zone of Cooperation (ZOCA) region of the Timor Sea.

Neither plan included Timor island.

Phillips, which proposes building an onshore LNG plant in Darwin linked by a 500 kms pipeline the Bayu-Undan, sees some obstacles to locating the plant on Timor island.

It also is at odds with BHP, which favors an offshore plant using patented technology.

Drawbacks to building the plant on Timor island involve laying a pipeline in an seismically active region across a marine trench as deep as 3,000 meters. A lack of existing infrastructure on the island also is a concern, the spokesman said.

One of the benefits is that the distance from the field to the island is only about 350 kms -- about 150 kms less than to Darwin, the spokesman said.

The Timor island proposal is expected to be tabled at meeting next week of Australian and Indonesian ministers in the Australian city of Cairns over joint development of the Timor Gap.

The discussions are likely to focus on royalties paid to Indonesia once the gas is transported outside the zone.

The current treaty, signed in 1989 before Bayu Undan was discovered, is silent on whether Indonesia can claim royalties on sales of processed gas from the field.

Australian Prime Minister John Howard earlier this wee said in Jakarta he hoped the two countries could reach an equitable solution.

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.