Woodside, East Timor to Hold Talks on LNG Plant
October 21, 2011
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Australian oil and gas firm Woodside Petroleum aims to hold further talks with the East Timor government on its stalled Sunrise LNG project, the company said, but analysts played down the chances of an easy breakthrough to resolve the lengthy dispute.

East Timorese officials have told media in recent weeks that Woodside had agreed to revisit the idea of onshore processing from the Greater Sunrise gas field in the Timor Sea, which the East Timor government wants in order to create jobs, instead of a floating liquefied natural gas facility.

Woodside has sounded a more conciliatory note on Sunrise under its new chief executive officer, Peter Coleman, who recently held meetings with the government in Dili, but has stopped short of saying it will reconsider an onshore option.

“We strongly believe it is not beyond all of us to find a solution to the current impasse,” a Woodside spokesman said.

Under Woodside’s former chief executive, Don Voelte, known for his assertive style, the company’s negotiations with East Timor had become embittered, with each side accusing the other of intransigence and lack of good faith.

On one occasion, protesters prevented Voelte and other representatives of the joint venture from leaving an airport lounge for two hours, according to one media report.

Industry analysts said that while Woodside’s fresh approach was much needed, it was still unclear when and how the long conflict over the location of the LNG plant will be resolved.

“Through the long history of the project, there’s been multiple occasions on which there’s been a potential indication of a solution to the impasse or potential give from both sides,” said Benjamin Wilson, an analyst for JPMorgan Chase in Sydney. “The fact of the matter remains, it’s still stalled.”

Onshore production brings with it a host of engineering challenges as well as a higher price tag, said Di Brookman, an analyst with CLSA.

“At the end of the day, it’s the cost that’s going to be absolutely significant,” Brookman said.

Wilson agreed, saying a floating option was the most commercially viable.

“Whether they can still justify the project on a returns basis if they are required to build an onshore processing facility in Timor remains to be seen.”

Coleman has been cautious on when he may sanction other key projects.

He is counting on the 14.9 billion Australian dollar ($15.3 billion) flagship Pluto LNG project off Western Australia to ignite growth in 2012, but has said he is not going to be bound by the end-year deadline for deciding on expansion.

In its latest production report on Friday the company said that it remained committed to making a final investment decision on its Browse project by mid-2012. It also said that it would release early one of two rigs exploring for gas on the Pluto project.

Shares of Woodside fell 0.7 percent on Friday, extending the previous day’s 4 percent decline.  


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