Phillips says Timor Sea project delayed two years

Phillips says Timor Sea project delayed two years

BARTLESVILLE, Okla. (Reuters): Phillips Petroleum Co. said
Monday production of liquefied natural gas at the Bayu-Undan gas
field in the Timor Sea off Indonesia has been delayed by a weak
market and disagreements with its major partner, Australian oil
firm The Broken Hill Pty. Co. Ltd.

Phillips President Jim Mulva told Reuters at the company's
annual meeting it had hoped to produce LNG from the field by
2003, but that "it may be closer to 2005 or 2006."

Chairman Wayne Allen said the two-year delay was due to weak
market conditions and a dispute between Phillips and Broken Hill
Pty. (BHP) on whether to build the proposed LNG plant in the
northern Australia city of Darwin or offshore near the gas field.

"With what is happening in Asia, the markets are very soft so
we have to have the best low-cost facility or it doesn't make
economic sense," Allen said.

BHP was recently reported to be keen on selling its 23.5 stake
in the Bayu-Undan field but Allen said BHP was not offered as
much as it had hoped.

"I don't think they were satisfied with the offers, so there
is a little sorting out to do on it this year," he said.

Bayu-Undan 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.

The Phillips/BHP consortium plans a plant with a capacity of
up to three million tons per year.

Phillips, which is the largest participant in Bayu-Undan with
a stake of about 25 percent, wants to build the LNG plant in
Darwin, using a 311-mile (500-km) pipeline to link it to the gas
field.

But BHP has proposed an offshore processing plant using its
own patented technology. The field lies in the Timor Sea Zone of
Cooperation, a joint Indonesian-Australian jurisdiction.

Allen said the two companies were still negotiating and would
work out a solution.

Meanwhile BHP said yesterday it was committed to developing
the gas phase of the Bayu-Undan field in the Timor Sea, despite
rumors it wants to sell its interest.

BHP said it was working to resolve a dispute with its partner,
Phillips over the preferred development of LNG from the rich
field.

"We want to look at options to secure alignment within the
joint venture to move the project forward. We are committed...
we want to get on with it," Garratt said.