Darwin LNG plant faces up to two years on ice
Summary: The Darwin LNG plant faces up to two years of interruption to exports as operator ConocoPhillips and partners including Santos bring replacement gas supply online and prepare for a further 20 years of operation.....
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The downtime was "always inevitable" given the work needed to refit it to extend its life, said Chris Wilson, president of Conoco's operations in the western part of Australia.
The plant is Australia's second oldest liquefied natural gas operation.
Conoco and Santos are targeting a final go-ahead in the March quarter next year to proceed with the development of the offshore Barossa gas field, which will replace the maturing Bayu-Undan field in the Timor Sea, the current source of supply for the 3.7 million tonnes a year Darwin LNG operation.
Mr Wilson said Conoco expected Bayu-Undan gas, which started flowing in 2006, to run out at about the end of 2022, plus or minus a year, while Barossa gas would not start up until later.
"So we expect about a year, perhaps to two years or downtime," he said in an exclusive interview.
"It's not really a big problem in so far as we have a lot of work to do in Darwin to extend the life of the facility and so we'll use that downtime – you can always work more effectively, efficiently and safely when you don't have a live facility."
The Barossa field, in which South Korea's SK E&S also has a stake, became the lead candidate to replace Bayu-Undan as the source of supply for Darwin LNG after Timor-Leste ruled out the option of processing gas at the Sunrise field in Australia. That development led to both Conoco and Shell selling their stakes in Sunrise to the Timor-Leste government, which is working to have gas from the field supply a new LNG plant that would be built on the nation's southern coast.
However, the Darwin LNG venture is yet to formally decide to use Barossa gas as its replacement supply, with ENI's Evans Shoal field also still in the running. That decision is expected by the end of the year.
Work is under way to prepare for replacement gas to feed Conoco's Darwin LNG plant.
The Barossa field, 300 kilometres north of Darwin, may cost $US4 billion ($5.8 billion) to develop, according to energy consultancy Wood Mackenzie. Meanwhile, the investment to refit the LNG plant was "reasonable", Mr Wilson said.
Keeping the Darwin LNG plant operating with replacement gas – known as backfilling – was "still an expensive investment and you need to do everything you can to keep your costs down", he said, adding that recent changes to the petroleum resource rent tax have had a "modest negative impact" on economics.
Meanwhile, yet to be sorted are arrangements for processing third-party gas in Darwin LNG. Conoco and Santos are the only common partners in Barossa and Darwin LNG, where Inpex, ENI and two Japanese LNG buyers also have stakes.
Mr Wilson said other possible sources of gas for Darwin LNG could be considered for "backfill" the next time around, when Barossa ran out, or potentially for an expansion at Darwin, where the site has approvals to install up to 10 million tonnes a year of LNG capacity. Those other sources include the Poseidon field in the Browse Basin – owned by Conoco, Origin Energy and PetroChina – and Evans Shoal, if Barossa gas is selected to replace Bayu-Undan.
"Poseidon is still out there: it's a good asset, it will be developed one day and whether it comes as a second train or as backfill to backfill, we'll just have to wait and see, or whether it goes to other infrastructure," Mr Wilson said.