Gorgon gets go-ahead

THE massive $15 billion Gorgon liquefied natural gas project off Western Australia’s northern coast moved a step closer to production this month when the State Government cleared the path for environmental approval.

The State upheld an appeal from Gorgon partners Chevron, ExxonMobil and Shell against the WA Environmental Protection Authority’s recommendation that the project not go ahead because it could harm the rare flatback turtle.

But the green light was given – albeit on strict environmental conditions. These included Gorgon joint venturers spending $60 million protecting turtles on the island and sinking greenhouse gases underground.

The project is awaiting final federal approval, expected to be made in January, subject to it getting final a go-ahead from the WA Government.

The Gorgon partners have said they will make a final investment decision in mid-2007. Construction is expected to begin in 2008.

WA Govt throws Woodside a bone

Woodside also scored a win with the WA Government this month over the terms by which it supplies domestic gas from its export-oriented Pluto project.

The board of the Perth-based oil and gas giant agreed to spend up to $1.4 billion on long-lead time items for the $6-10 million project ahead of a final investment plan.

On the same day the company announced the funding decision, it also said it had had talks with the WA Government on how its domestic gas policy would apply to the offshore project.

Woodside came out of the talks agreeing to market and sell 15% of the project’s gas to the WA domestic market, providing it is “commercially viable”.

The company said it would begin preparing the LNG development next year once it receives environmental approval from the Federal Government. State environmental approval for site works has already been granted.

Pluto is scheduled to begin supplying LNG to customers Kansai Electric and Tokyo Gas by the end of 2010.

ExxonMobil, BHPB shake hands over Scarborough

ExxonMobil and BHP Billiton seemed to have ended a year-long impasse when they announced plans to start a feasibility study on developing the Scarborough natural gas field off the WA coast for LNG exports.

Development of Scarborough had previously looked uncertain with very public differences of opinion between the two 50:50 partners about the prospects for developing the field.

ExxonMobil Australian chairman Mark Nolan last year said he disagreed with BHPB’s high assessment of reserves at 8 trillion cubic feet of gas and that the field was unlikely to be commercially viable in the near term.

But this month ExxonMobil spokesman Rob Young said the oil and gas giant’s view of the project has now evolved after more technical information came to light following BHPB’s appraisal program.

The WA Government has previously estimated the project, which is intended to supply LNG to California via the proposed Cabrillo Port LNG terminal, could cost about $5 billion.

Santos, AGL compete for QGC

Santos this month wrote to Queensland Gas Company shareholders, saying its $606 million hostile takeover bid would be extended to January 31 to allow it to consider its position in relation to QGC’s proposed transactions with AGL. The offer had previously been due to expire on December 19.

Earlier, QGC said AGL would pay up to $1.44 per share (or up to $292 million) to secure 27.5% of QGC’s expanded capital, while QGC would buy back up to 12.5% of its expanded capital at $1.44/share.

Santos is offering $1.26 for each QGC share.

QGC shareholders are due to meet in February to give the green light to the AGL deal, by which stage its investors including Santos, will have received an analysis of the proposal.

On the same day of the deadline for Santos’ offer, the competition watchdog is due to publish its final decision on the proposed hostile takeover.

The Australian Competition and Consumer Commission is investigating whether the takeover would reduce competition in the eastern states’ gas market and also potentially thwart the proposed PNG gas pipeline.

Meanwhile, in a bid to rebalance its portfolio, Santos is pulling out of the United States to refocus its exploration activities in Australia, Asia and the Middle East.

Coogee scraps $380m IPO

A day before it was expected to list, Perth-based Coogee Resources surprised the Australian Stock Exchange when it withdrew its $380 million initial public offering on December 7.

The Timor Sea explorer said the bookbuild process for its IPO had resulted in an unattractive price. The offer price for the IPO was expected to be $1.90-2.33/share.

The company has since said it is reviewing funding options for its projects and is considering bringing in a potential partner to the 37 million barrel (MMbbl) Montara project or revisiting the IPO in a possibly restructured form.

The company had expected to list with a market capitalisation of $798-979 million, which would have made it one of the largest floats of the year.

Hardman waves goodbye

Also on the ASX, Hardman stock traded for the last time this month after its shareholders voted in favour of a $1.47 billion takeover offer from London-listed Tullow Oil.

About 94% of the votes cast at a meeting in Perth were in favour of the $2.02/share offer.

Hardman and Tullow are exploration partners in Uganda, where they believe they are on the verge of opening up a “major new oil province”.

In addition to its Ugandan interests, buying Hardman will give Tullow a 19% stake in Woodside’s Chinguetti oil field, offshore Mauritania, as well as a large acreage position offshore South America.

Full steam ahead for Basker-Manta

The much-anticipated Basker-Manta oil project began full-field production this month with rates of up to 25,000 barrels of oil per day.

Full-field production follows a six-month extended production test at the $330 million project, which ended in August. As a result of the EPT, technical consultants, Gaffney Cline and Associates upgraded reserves 33% to 39.2MMbbl.

Since work on the Anzon/Beach Petroleum 50:50 JV project began almost two years ago, the proved and probable oil reserves have increased nearly 70%, after deducting EPT production.

Nexus gets to keep Longtom

Also in the Bass Strait, Apache Energy this month officially washed its hands of the Longtom gas project in a move that will give operator Nexus Energy a 100% interest in the field, offshore permit Vic/P54.

Under a prior agreement, Apache decided not to participate in drilling Longtom-3, the high-profile appraisal well that successfully tested gas and condensate in September.

But at the time, Apache retained a right to reclaim its interest in the field in exchange for an agreed back-in fee and a penalty fee worth six times that amount.

Apache this month confirmed it would not exercise its buyback right into the project.

With development to occur next year, first Longtom gas production is expected to start in the second half of 2008.