Voyaging into new project waters

A subsidiary of one of the world’s largest exploration and production companies, ConocoPhillips Australasia has projects across Australia, and in the waters of the Timor Sea.
As operator of the Darwin LNG plant, ConocoPhillips is also a valuable joint venture partner in the Australia Pacific LNG (APLNG) CSG to LNG development.
The company’s project umbrella also covers the Greater Sunrise gas fields, three permits in the Browse Basin and two offshore gas discoveries.
Last year, the company was awarded the APPEA award for excellence in safety performance for the third time in a row.
In a media release, ConocoPhillips reported that it was recognised for its innovative safety initiatives and achievements in the category of operating companies that recorded, jointly with their contractors, more than 500,000 working hours for the calendar year.
Darwin LNG facility
Construction of ConocoPhillips’s single train 3.7 million tonne per annum Darwin LNG plant began in June 2003 at Wickham Point to process gas from the world-class Bayu-Undan gas condensate field in the Timor Sea.
It was commissioned in January 2006, and first LNG sales to Japan began soon after: the facility now supplies about 3mtpa of LNG to Tokyo Electric Power Company and Tokyo
Gas.ConocoPhillips has a 56.9 per cent interest in the gas plant and the Bayu-Undan asset; Santos (11.5 per cent), Inpex (11.4 per cent), Eni (11 per cent), and Tokyo Electric and Tokyo Gas (an aggregate of 9.2 per cent) hold the remaining interest.
Discovered in 1995, the Bayu-Undan field is estimated to contain 3.5 trillion cubic feet of gas and 500 million barrels of condensate and LPG.
It is about 500km northwest of Darwin in the Joint Petroleum Development Area (JPDA): an area of water that is subject to territorial claims by both the Australian and Timor-Leste Governments. The JPDA was established in the Timor Sea Treaty: an interim agreement that was implemented in 2003 to provide the framework for all petroleum exploration and development in the region.
Production from the Bayu-Undan field – which has a central production and processing complex, an unmanned wellhead platform, and a floating storage and offloading facility – began in 2004, and is connected to the Darwin LNG facility by a 502km, 26 inch-wide subsea pipeline.
According to ConocoPhillips, the Darwin LNG plant introduced several firsts to the evolution of LNG liquifaction technology.
“The ConocoPhillips Kenai LNG project in Alaska in 1969 set the trend for the LNG industry as the first LNG plant to use gas turbines for refrigerant compressor drivers in place of the traditional steam turbines,” the company stated in a public report released in 2011.
“The Darwin LNG facility continues to build on this history of innovation by being the first LNG plant to use high-efficiency, low-emission and aero-derivative gas turbines as refrigerant drivers.”
The facility was also designed to incorporate numerous energy-saving measures, including the installation of systems to recover waste heat and re-capture offtake flash gasses.
In September 2012, ConocoPhillips Australian business unit president Todd Creeger stirred fresh interest surrounding the possibility of adding a second train to the Darwin LNG plant, which is authorised to produce 10mtpa of LNG.
Mr Creeger was quoted as having said that although the company had yet to find gas reserves that could underpin the construction of a second train, exploration drilling in the Browse Basin could turn up a good result.
The APLNG project
Owned by partners ConocoPhillips (37.5 per cent), Origin Energy (37.5 per cent) and Sinopec Corp (25 per cent), the APLNG JV is developing a CSG to LNG export operation in Queensland consisting of a gas pipeline running from the Bowen and Surat Basins to an LNG facility on Curtis Island at Gladstone.
A final investment decision for the APLNG endeavour was made in July 2011. One year later, ConocoPhillips sanctioned the development of a second, US$6 billion 4.5mtpa train: doubling the plant’s production capacity to 9mtpa.
Production from the first train is expected to begin in 2015, while LNG exports from the second train are scheduled to start in early 2016 under binding sales agreements to Sinopec and Kansai Electric Power Company.
The APLNG JV and Sinopec signed a sales agreement in April 2011 for the supply of 4.3mtpa of LNG for a 20-year period, as well as a subscription agreement under which Sinopec acquired a 15 per cent interest in the APLNG project. In January 2012, Sinopec increased its supply deal to 7.6mtpa and raised its equity to
25 per cent.
According to ConocoPhillips, it represented the largest LNG supply agreement in Australian history.
Kansai executed its sales agreement with the APLNG JV in November 2011 for 1mtpa of LNG, also for a 20-year period.
In a statement, ConocoPhillips chairman and chief executive Ryan Lance said that the APLNG project was strategically positioned to commercialise its “superior” CSG reserve position and satisfy Asia’s rapidly-growing demand for reliable, cleaner burning energy.
“The approval of Sinopec Corp’s additional subscription is testament to the strong growth market in China and the importance of Sinopec Corp as a key partner,” Mr Lance said.
The development is expected to generate significant capital investment up until 2020, creating thousands of jobs during construction, and increasing local skills capacity by means of apprenticeships, scholarships and vocational training.
In the pipeline
Greater Sunrise
Operated by Woodside, the Greater Sunrise gas and condensate fields (Sunrise and Troubadour), in which ConocoPhillips has a 30 per cent interest, are in the JPDA, 450km offshore Darwin and 150km from Timor-Leste.
Sunrise and Troubadour were discovered in 1974, and have been independently certified to contain a total contingent resource of 5.13tcf of dry gas and 225.9mmbbls of condensate.
According to the Australian Department of Resources, Energy and Tourism, about 80 per cent of the Greater Sunrise asset lies in an area of exclusive Australian jurisdiction, while the remaining 20 per cent is in the JPDA. The Treaty on Certain Maritime Arrangements in the Timor Sea, which came into force during 2007, stipulated that all upstream petroleum revenues from Greater Sunrise would be shared equally between Australia and Timor-Leste.
In a 2012 fact book, ConocoPhillips stated that although the agreement had been reached, “key challenges must be resolved before significant funding commitments can be made”.
The company explained that this included gaining the approval of both countries’ Governments for the final LNG development concept selected: the Woodside-led JV preferred floating LNG development concept while the Timor-Leste Government expressed a preference for a land-based processing facility.
Woodside stated on its website in October 2012 that, following the provision of technical data as requested by the Timor-Leste Government, further discussions were held and a timetable for the first of a series of technical workshops was agreed upon.
“We believe there remains an opportunity to agree on a development which satisfies the requirements of all parties. The key to reaching this goal is regular, open and constructive dialogue between the parties,” the company added.
Browse Basin
ConocoPhillips is operator of the Browse Basin permits: it holds a 60 per cent interest in WA-315-P and WA-398-P, and a 10 per cent stake in WA-314-P. Karoon Gas holds the remaining interests.
In addition to a 3D seismic survey, a four-well drilling campaign was conducted in 2009 and 2010. It produced encouraging results, with hydrocarbons encountered in two wells. A second phase of drilling is scheduled to be completed in 2013, and will involve a total of between five and eight wells.Caldita/Barossa
In June 2012, ConocoPhillips and JV partner Santos Offshore entered into a farm-out agreement with SK E&S, an affiliate of South Korean conglomerate SK Group, for the Caldita and Barossa gas discoveries in the Timor Sea.
SK Group agreed to earn a non-operated 37.5 interest in each of the adjacent NT/P61 and NT/P69 permits, which contain the discoveries and were owned by ConocoPhillips as operator and Santos Offshore on a 60/40 basis. The farm-out reduced the companies’ stakes in both permits to 37.5 per cent and 25 per cent.
As part of the agreement, SK Group will fund the first US$260 million needed for a three-well appraisal program in NT/P69.
ConocoPhillips reported in a media release that once the appraisal program was completed, SK Group would have the option to increase its interest to 49.5 per cent in each permit in exchange for US$60 million, shared between ConocoPhillips and Santos Offshore relative to their original interests in the permits.
In addition, SK Group will fund up to US$90 million of pre-front end engineering and design activities, starting in 2014.
Mr Creeger said the farm-out agreement was a positive step towards commercialising the Caldita and Barossa gas discoveries.
“While further appraisal work is required, we are hopeful that Caldita/Barossa will be developed as a LNG project either in Darwin or as a floating LNG facility,” Mr Creeger said.
SK Group will make a FID and first LNG cargo payments of up to US$110 million upon reaching certain milestones.
The Caldita discovery well was drilled in NT/P61 during 2005 and this was followed by an appraisal well in 2007, while the Barossa discovery well was drilled in NT/P69 during 2006. In a fact sheet, ConocoPhillips stated that the Barossa well confirmed the presence of a significant accumulation of natural gas and the possibility that it could be produced at commercial rates.
The appraisal program for Barossa will involve the drilling, evaluation, and potential production testing of hydrocarbon appraisal wells in a 845 square kilometre area using a semi-submersible mobile offshore drilling unit.
The drilling campaign is scheduled to begin in the second or third quarter of 2013 and will last for between 12 and 14 months, subject to environmental approvals and the availability of a drilling rig.

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