By Ross Kelly
SYDNEY--GDF Suez SA (GSZ.FR) and Santos Ltd. (STO.AU) backed
away from a multibillion dollar plan to develop natural gas fields
offshore Australia using untested floating liquefied natural gas
technology.
A floating LNG project "doesn't currently meet the companies'
commercial requirements", GDF Suez and Santos said in separate
statements Thursday. They would now look at alternative development
options, including piping gas to onshore processing facilities in
Darwin.
Vessels that can convert natural gas to a liquid at sea have
long captured the imagination of some of the world's biggest energy
companies because of what they promise: the ability to tap reserves
of natural gas stranded hundreds of miles from shore. They believe
the technology would help lower costs by eliminating a need for
pipelines and clearance of a large plot of land.
Royal Dutch Shell PLC (RDSA) approved construction of the
world's first floating LNG vessel in 2011 to process gas from the
Prelude field, also located off Australia's northern coast. The
giant vessel--longer than four football fields when laid end to
end--is being built in a South Korean shipyard and is scheduled to
start producing gas in 2016. ExxonMobil Corp. (XOM) and BHP
Billiton Ltd. (BHP) are also considering using floating LNG to
develop remote gas fields.
Budget overruns at several other LNG developments in Australia
have underscored the risks for international energy companies
weighing new projects. Woodside Petroleum Ltd. (WPL.AU) last year
shelved plans to build an onshore terminal to process natural gas
from its Browse resource in Western Australia state because it
wasn't commercially viable.
GDF Suez in 2010 paid Santos up to US$370 million to join the
Bonaparte LNG project. The deal included an upfront cash payment of
US$200 million for 60% of the Petrel, Tern and Frigate gas fields
in the Bonaparte Basin, located around 170 kilometers from
shore.
The company agreed to pay Santos an additional US$170 million
when a final investment decision was made on the proposed floating
LNG facility, which would process natural gas from the three
fields. Santos was previously aiming to begin construction in 2014,
with delivery of first cargoes by 2018.
Write to Ross Kelly at ross.kelly@wsj.com
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