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.