Timor Sea Bayu-Undan project on track, costs creep up

Petroz NL, a junior Australian oil company and a minority stakeholder in the world-class natural gas and condensate Bayu-Undan project in the Timor Sea, Friday said development was on track but costs have crept a little higher.

Phillips Petroleum Co. is the operator and largest stakeholder in Bayu-Undan with a 50.3 percent interest.

Other participants are Australian oil and gas producer Santos Ltd. with 11.8 percent, Petroz with 8.3 percent, Japan's Inpex with 11.7 percent, Kerr-McGee Corp. of the U.S. with 11.2 percent and British-Borneo Oil & Gas PLC with 6.7 percent.

"The timetable for development remains essentially the same with production commencing during the fourth quarter of 2003 and increasing to full scale production of some 113,000 barrels per day of condensate and liquefied petroleum gas during the first quarter of 2004," Petroz said in a quarterly report to the Australian Stock Exchange.

It said the cost of the project has crept up to US$1.46 billion from US$1.4 billion previously.

This latest figure came after a detailed review of costs by Phillips and incorporated firm pricing for the bulk of the major contracts for the project.

Petroz said Phillips was doing final detailed engineering design work and conducting tendering for the production facilities which include platforms, processing equipment and the floating storage and offloading vessel.

By the end of the second calendar quarter 2000, contracts totaling US$378 million had been awarded.

"It is expected that remaining contracts for the production facilities totaling some US$225 million will be awarded by mid August," Petroz said.

The only substantial contracts to be finalized are for development drilling, with these expected to be awarded during the first half of 2001, it said.

Bayu-Undan contains an estimated recoverable reserve of 400 million barrels of condensate and liquefied petroleum gas and 3.4 trillion cubic feet of natural gas.

The field is about 500 kilometers northwest of Darwin, Australia, and 250 kilometers south of Suai, East Timor, in the Timor Sea.

Petroz noted recent statements by East Timorese leaders on their intention to renegotiate the terms of the now-lapsed Timor Gap Treaty.

"The East Timor leaders have consistently stated that the conditions which currently apply to the petroleum contracting companies will be honored," Petroz said.

"East Timor is seeking a change to the agreement with the Australian government regarding the allocation of government royalties and other benefits from petroleum developments in the Timor Gap zone of cooperation," it said.

Petroz also said an agreement with New Zealand-based Fletcher Challenge's energy division (FEG) will secure its participation in Bayu-Undan. (*)