BHP, Australian Explorers Shift to Gas as Oil Finds Dwindle
BHP Billiton and BP Plc are among petroleum companies that may commit this year to spend more than A$5 billion ($3.9 billion) in Australia, mostly to produce natural gas as oilfield discoveries decline.
BHP, BP and Royal Dutch/Shell Group are among investors in the North West Shelf venture, which may decide this year to spend A$2 billion to expand liquefied natural gas output. BHP may also approve more than A$1 billion of investment to extract about 200 million barrels from two of the nation's last undeveloped oilfields, off the coast of Western Australia.
Australian oil output may rise next year for the first time in five years as new projects start up, according to a government forecast. Two years later, production is set to resume the decline as explorers failed to find significant new deposits, discouraging spending on wells in previously unexplored areas.
``Frontier drilling continues to disappoint and that's a bit of a concern,'' said Stephen O'Rourke, an analyst on Wood Mackenzie's Australasia Upstream team. ``There hasn't been a major success that has opened up a new basin'' to boost oil production.
Oil and gas are among the commodities that may help Australia, the fifth-biggest economy in the Asia-Pacific region, to expand 3 percent in the year ending June 30, according to a government forecast. Earnings from commodity exports may rise 19 percent as prices rose.
The nation's oil production will resume its decline in the year ending June 2008 as older fields deplete faster than output increases at new fields, said Gerard Burg, an energy analyst at the Australian Bureau of Agricultural and Resource Economics, or Abare, a government forecaster.
No oil field of more than 350 million barrels has been found in Australia since the discoveries in the Bass Strait in the 1960s, Don Voelte, Chief Executive of Woodside Petroleum Ltd., which operates the North West Shelf, said March 18. Output may be less than half current levels by 2020, while demand is likely to exceed production at least threefold, he said.
Perth-based Woodside, Australia's second-biggest oil and gas producer, is increasing exploration outside Australia, in the U.S. Gulf of Mexico and Africa, where it sees more potential for larger oil finds.
Santos Ltd., Australia's third-biggest oil and gas producer, this year will for the first time drill more so-called wildcat wells overseas than in Australia. Santos is focusing on Indonesia, where it made the Jeruk oil discovery, possibly the company's largest-ever oil find.
Voelte and Philip Aiken, group president of energy for BHP Billiton, will be among speakers at the Australian Petroleum Production and Exploration Association's conference, starting today in Perth. Ron Billings, global LNG vice president at Exxon Mobil Corp. and Colin Beckett, general manager of venture gas at ChevronTexaco Corp.'s Australian unit will also speak.
BHP and Woodside have applied for environmental approval and completed designs for the A$1 billion Stybarrow oilfield venture off northwestern Australia, and will probably give a final go- ahead this year to start output by September 2007, Burg said.
Near Stybarrow, BHP and its partner, Apache Corp., may also approve this year the Pyrenees oil project, for which environmental approvals have been sought.
``2005 is going to be our biggest year ever for drilling, with 60 exploration and appraisal wells planned,'' said Eve Howell, managing director of Apache's Australian unit.
Other ventures to find oil in new areas haven't been as successful.
Woodside, EnCana Corp. and Anadarko Petroleum Corp. in 2003 failed to find oil at their A$50 million Gnarlyknots-1 well in the deepwater Great Australian Bight 325 kilometers (202 miles) off Australia's southern coast. Last year, Santos, Unocal Corp. and Inpex Ltd. unsuccessfully drilled the Amrit-1 well in deepwater off southeastern Australia.
Fewer than 9,000 wells have been drilled in Australia in an area of more than 16 million square kilometers of so-called sedimentary basins, or geological formations that may trap oil and gas, compared with more than 60,000 wells in the Gulf of Mexico alone, the government said on its Web site.
``What we're not seeing is the risk-takers really moving into new play types'' that may yield larger oil finds, John Feenan, a Sydney-based Asia-Pacific energy consultant at Wood Mackenzie Consultants Ltd., said on April 1.
ChevronTexaco Corp., the second-biggest U.S. oil company, made Australia's largest discovery last year, the Wheatstone gas field that may hold about 3 billion cubic feet, underscoring the shift in focus to gas, said Wood Mackenzie's O'Rourke.
The U.S. company owns 50 percent of the A$11 billion Gorgon LNG project off Western Australia, which may be approved for development next year.
BHP is studying a A$4 billion investment to build a 6 million tons-a-year LNG plant using gas from the Scarborough field off northwest Australia for export to North America.
The government is expected today to release more offshore acreage for exploration, including areas in the unexplored Bremer Basin. It estimates Australia may still have 11 billion barrels of undiscovered oil and condensates reserves, as well as 114 trillion cubic feet of gas.
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Angela Macdonald-Smith in Sydney at amacdonaldsm@Bloomberg.net.
To contact the editor responsible for this story:
Reinie Booysen at rbooysen@Bloomberg.net.