THE WALL STREET JOURNAL/DOW JONES NEWSWIRES: UPDATE: Australia Gorgon, NW Shelf Seek S Korea Gas Deal (ShellNews.net)
By STEPHEN BELL
Posted 21 September 2004
Of DOW JONES NEWSWIRES
PERTH -- The race to win a major liquefied natural gas supply contract with
South Korea heated up Monday as two Western Australian project operators lodged separate bids for the US$30 billion deal.
ChevronTexaco Corp.'s (CVX) Gorgon gas venture is competing with the Woodside Petroleum Ltd. (WPL.AU)-operated North West Shelf project to export LNG to South Korea starting in 2008.
Both Australian projects face stiff competition from several other Asian, Russian and Middle Eastern proposals to win Asia's latest LNG prize.
The A$6 billion Gorgon project, which last year won a major LNG sales deal with China, said it will lodge a bid Monday with South Korea.
"I can confirm that we are going to respond to the tender invitation," Neil Theobald, ChevronTexaco's president of marketing for Gorgon Gas Australia, told Dow Jones Newswires.
However, Theobald declined to discuss the tender details, or whether Gorgon will bid for the entire contract.
The South Korean government recently gave the green light to Korea Gas Corp. (036460.SE), or Kogas, to tender for as much as 6 million metric tons of gas to be supplied over 20 to 25 years beginning in 2008.
The deal is likely to be valued at up to US$30 billion, say South Korean gas industry officials and Western energy company executives.
Australia's North West Shelf also confirmed it will participate in the tender, which is likely to be contested by 10-12 global LNG suppliers.
"We are lodging a bid for LNG supply to Kogas," a North West Shelf spokesman told Dow Jones Newswires.
Woodside is operator and one-sixth owner of the North West Shelf, where a recent A$2.7 billion expansion lifted the venture's annual LNG export capacity to 11.7 million tons.
Australia's biggest resources project, the North West Shelf has shipped more than 1,600 LNG cargoes over 15 years, mainly to a core group of Japanese power utilities.
It also signed a A$25 billion LNG export deal with China in August 2002, where shipments are due to begin in late 2006.
A win in South Korea, along with the renewal of existing Japanese contracts, would underpin a further expansion of the North West Shelf to around 16 million tons.
The other equal partners in the North West Shelf are BHP Billiton Ltd. (BHP), Royal Dutch/Shell (RD), Chevron Texaco Corp. (CVX), BP PLC (BP) and Japan Australia LNG, itself an equal joint venture between Japan's Mitsubishi Corp. (8058.TO) and Mitsui & Co. (8031.TO).
The partners believe they are well placed to win at least part of the South Korean deal after last year boosting dealings with Kogas via a 500,000 metric ton per year "midterm" contract running over seven years.
There is media speculation that Kogas will split the latest contract across two or three different suppliers, to spread its risk.
The Kogas schedule calls for preferred bidders to be notified by Nov. 30, leading to supply agreements before the end of the year.
People familiar with the situation say that Kogas invited tenders from seven existing suppliers along with five potential new suppliers.
The latter group includes Gorgon, Shell's Sakhalin-2 venture in Russia, BP's Tangguh project in Indonesia, and projects in Yemen and Iran.
ChevronTexaco is operator of Gorgon, where the minority partners are Shell and ExxonMobil Corp. (XOM).
Gorgon needs final environmental clearance from the Western Australian state government to build its LNG export terminal on Barrow Island, 130 kilometers off the coast of northwest Australia.
The project, which could produce up to 10 million tons per year, plans to export LNG to Asia and North America starting in 2008.
-By Stephen Bell, Dow Jones Newswires; 61-8-9245-6408
-Edited by Graham Morgan