ExxonMobil Plans World's Biggest FLNG Facility

SYDNEY - ExxonMobil Corp. laid out plans for a development using the world's biggest floating natural gas processing plant, in a technically challenging move that underscores its bullish view on Asian demand for the fuel.

Exxon and partner BHP Billiton Ltd. want to anchor a vessel extending 495 meters--the equivalent of around five football pitches--at sea to tap into the remote Scarborough natural gas field offshore Western Australia. They're seeking government approval for the multibillion dollar project, and targeting first production as early as 2020.

Floating liquefied natural gas technology, known as FLNG, is untried but has captured the attention of some of the world's biggest energy companies seeking to access gas fields that are too small or remote to develop using pipelines and onshore facilities. Royal Dutch Shell PLC is a leading proponent of FLNG vessels, which it plans to deploy in Australia and possibly elsewhere.

The relative calm of the waters off Australia's northeastern coastline make the country a strong candidate to accommodate the world's first FLNG vessels. Its stable political environment and proximity to Asian markets that have a growing appetite for fuels that are cleaner than coal when burnt are also drawcards. According to the International Energy Agency, China's natural gas demand alone will more than quadruple to 545 billion cubic meters between 2011 and 2035.

However, companies like Exxon need to ensure their vessels can withstand stormy seas. One main concern is that the forces generated by liquefied gas sloshing in partially filled containers can damage the storage system. That issue is being addressed with containers designed to minimize sloshing and with elaborate anchoring systems that limit the movement of vessels in the water.

Exxon's proposed facility would produce between 6 million and 7 million metric tons of liquefied natural gas, or LNG, a year for several decades. The Scarborough resource was discovered in 1979 and is estimated to hold up to 10 trillion cubic feet of gas--equal to more than a third of the U.S.'s annual gas consumption.

Early design work would begin next year, ahead of a final investment decision in 2014-15, Exxon said in a filing to the federal government's environment department. A Melbourne-based spokeswoman for Exxon said FLNG has "the capacity to reduce our capital costs by removing the need for infrastructure" and has a smaller environmental footprint.

With close to a dozen natural-gas export terminals planned for its coastline, Australia is poised to leapfrog Qatar as the world's top exporter of LNG by the end of the decade. LNG is natural gas chilled to a liquid so that it can be shipped by tanker.

The industry, however, is facing increasing cost headwinds driven by a strong local currency and a shortage of skilled labor. Underscoring these challenges, Chevron Corp. and smaller joint venture partners including Exxon and Shell said in December the cost of building their giant Gorgon LNG project on the Western Australian coast had blown out by a fifth to 52 billion Australian dollars (US$54.4 billion).

The budget overruns come as Australia becomes increasingly likely to face rising competition from emerging gas-export industries in North America and Africa, which could make it tougher to secure customers.

FLNG is often touted by company executives as a means of mitigating cost pressures because much of the construction process occurs offshore in countries with cheaper sources of labor. Companies also don't have to pay for acquiring and clearing land.

"For some of the more economically challenged gas resources out there, floating LNG is going to take on a much higher profile," said Andrew Williams, a Melbourne-based energy analyst at RBC Capital Markets.

In 2011, Shell committed to use a FLNG vessel to process natural gas from its Prelude field in the Browse Basin offshore northwestern Australia. The vessel is due to begin producing 3.6 million tons of LNG each year from 2017.

Shell estimated that its project would cost between US$3 billion and US$3.5 billion for every 1 million tons of production capacity, or between US$10.8 billion and US$12.6 billion.

In its filing Tuesday, Exxon didn't estimate a cost for its Scarborough development.

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ExxonMobil Plans World's Biggest FLNG Facility

SYDNEY - ExxonMobil Corp. laid out plans for a development using the world's biggest floating natural gas processing plant, in a technically challenging move that underscores its bullish view on Asian demand for the fuel.

Exxon and partner BHP Billiton Ltd. want to anchor a vessel extending 495 meters--the equivalent of around five football pitches--at sea to tap into the remote Scarborough natural gas field offshore Western Australia. They're seeking government approval for the multibillion dollar project, and targeting first production as early as 2020.

Floating liquefied natural gas technology, known as FLNG, is untried but has captured the attention of some of the world's biggest energy companies seeking to access gas fields that are too small or remote to develop using pipelines and onshore facilities. Royal Dutch Shell PLC is a leading proponent of FLNG vessels, which it plans to deploy in Australia and possibly elsewhere.

The relative calm of the waters off Australia's northeastern coastline make the country a strong candidate to accommodate the world's first FLNG vessels. Its stable political environment and proximity to Asian markets that have a growing appetite for fuels that are cleaner than coal when burnt are also drawcards. According to the International Energy Agency, China's natural gas demand alone will more than quadruple to 545 billion cubic meters between 2011 and 2035.

However, companies like Exxon need to ensure their vessels can withstand stormy seas. One main concern is that the forces generated by liquefied gas sloshing in partially filled containers can damage the storage system. That issue is being addressed with containers designed to minimize sloshing and with elaborate anchoring systems that limit the movement of vessels in the water.

Exxon's proposed facility would produce between 6 million and 7 million metric tons of liquefied natural gas, or LNG, a year for several decades. The Scarborough resource was discovered in 1979 and is estimated to hold up to 10 trillion cubic feet of gas--equal to more than a third of the U.S.'s annual gas consumption.

Early design work would begin next year, ahead of a final investment decision in 2014-15, Exxon said in a filing to the federal government's environment department. A Melbourne-based spokeswoman for Exxon said FLNG has "the capacity to reduce our capital costs by removing the need for infrastructure" and has a smaller environmental footprint.

With close to a dozen natural-gas export terminals planned for its coastline, Australia is poised to leapfrog Qatar as the world's top exporter of LNG by the end of the decade. LNG is natural gas chilled to a liquid so that it can be shipped by tanker.

The industry, however, is facing increasing cost headwinds driven by a strong local currency and a shortage of skilled labor. Underscoring these challenges, Chevron Corp. and smaller joint venture partners including Exxon and Shell said in December the cost of building their giant Gorgon LNG project on the Western Australian coast had blown out by a fifth to 52 billion Australian dollars (US$54.4 billion).

The budget overruns come as Australia becomes increasingly likely to face rising competition from emerging gas-export industries in North America and Africa, which could make it tougher to secure customers.

FLNG is often touted by company executives as a means of mitigating cost pressures because much of the construction process occurs offshore in countries with cheaper sources of labor. Companies also don't have to pay for acquiring and clearing land.

"For some of the more economically challenged gas resources out there, floating LNG is going to take on a much higher profile," said Andrew Williams, a Melbourne-based energy analyst at RBC Capital Markets.

In 2011, Shell committed to use a FLNG vessel to process natural gas from its Prelude field in the Browse Basin offshore northwestern Australia. The vessel is due to begin producing 3.6 million tons of LNG each year from 2017.

Shell estimated that its project would cost between US$3 billion and US$3.5 billion for every 1 million tons of production capacity, or between US$10.8 billion and US$12.6 billion.

In its filing Tuesday, Exxon didn't estimate a cost for its Scarborough development.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Drilling Commenced at New World's Belize Well

New World Oil and Gas Plc, an oil and gas exploration and development company focused on Belize and Denmark, announced that the Rio Bravo #1 well targeting the West Gallon Jug Crest prospect commenced drilling March 1 at its Blue Creek Project in Northwest Belize. The Company's Competent Person, RPS Energy, estimates West Gallon Jug Crest to hold a P50 un-risked prospective resource of 113 million barrels of oil (MMbo) (Y1 and Y2 intervals) and a P50 un-risked Net Present Value (NPV10) of $2.6 billion on a 100 percent working interest basis.

The ThermaSource International LLC (ThermaSource), rig #104 will drill to a total depth (TD) of 8,800 feet, targeting the Upper Jurassic Margaret Creek Formation. Drilling results will be released once TD has been reached, which is expected to be by May 1, 2013.

Analysis of the technical data recorded at the Blue Creek #2 and #2A ST wells that were recently drilled at the B Crest prospect has confirmed an active hydrocarbon system exists on New World's Blue Creek and West Gallon Jug acreage. The West Gallon Jug Crest prospect is located approximately 22 miles (35 kilometers) SSW from the B Crest Prospect and is a four way structural closure that is not fault dependent, as was the case at B Crest.

New World CEO William Kelleher said, "Our first two wells in NW Belize confirmed the presence of several main elements which make up a working hydrocarbon system: source, migration and seal. An essential element, trap, was likely breeched at B Crest as a result of a leaking fault, possibly caused by late tectonic activity. Unlike B Crest however, West Gallon Jug is a structural high, and is not fault dependent in order for a trap to exist and contain oil. Hydrocarbons can migrate up and be trapped, and crucially not leak off through leaking fault planes, which is likely what happened at B Crest. As a result, we are tremendously excited by the commencement of drilling at our West Gallon Jug prospect.

"On the completion of this third well, we will have earned into 100 percent working interest in our Blue Creek Project. RPS Energy has assigned an unrisked P50 resource of 113 MMbo for West Gallon Jug which equates to a NPV10 of $2.6 billion on a 100 percent working interest basis. I look forward to working with ThermaSource again, our first class drilling contractors, as we set out to deliver our aim of making a commercial hydrocarbon discovery."

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Australian Oil, Gas Workers World's Best Paid at $163,600/Year

SYDNEY - Workers in Australia's oil and gas sector are the highest paid in the world and earn 25% more than U.S. counterparts, according to a new survey that lays bare the pressures facing companies like Chevron Corp. as they invest billions of dollars to meet Asia's booming energy demand.

Australian workers pocket an average of $163,600 a year to work on projects that range from platforms drilling for natural gas in deep water off the northern coast to onshore rigs seeking to unlock deposits of unconventional gas in the sweltering heat of the Australian Outback, the survey by recruitment firm Hays found.

The labor market has tightened as more than $160 billion is invested in Australia's natural gas industry, which has to compete with big mining projects for pipe layers, welders and engineers. As a result, Hays said the bulging pay-packets offered Down Under are even higher for imported workers--coming in at $171,00 a year.

A combination of vast natural gas reserves, a stable political environment and proximity to fast-growing Asian economies have put Australia on course to overtake Qatar as the world's biggest exporter of liquefied natural gas, or LNG, by the end of the decade. Around 12 multi-billion LNG projects are either under construction on its coastline or on the drawing board.

With a population of around 23 million people--less than ten times smaller than the U.S.-- Australia lacks a deep labor pool for major projects and large salaries are often required to entice workers to remote corners of the country.

Spiralling labor costs have already contributed to a series of budget overruns at Australian gas-export projects operated by Chevron, BG Group PLC and Australia's Santos Ltd. In the largest example, Chevron said higher labor costs were partly to blame for a 21% increase in the cost of building the Gorgon liquefied natural gas development to 52 billion Australian dollars ($53.5 billion).

But in a mild positive for developers, the average Australian salary in the oil and gas sector fell 0.7% in 2012 compared to 2011.

Norway is the second most expensive country to hire local workers, with an average annual salary of $152,600 needed for recruitment, Hays said. New Zealand ranks third with a median pay packet of $127,600.

The survey was based on the responses of 25,000 people working across 53 countries. The U.S. ranked fifth with $121,400 for local workers, while Sudan brought up the rear with $31,100.

"The guide does reveal signs of a slowdown in salary growth for both imported and local labour in Australia, which may be a sign that the market has passed its peak in terms of demand for specialist oil and gas skills," said Matt Underhill, managing director of Hays Oil & Gas.

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Australian Oil, Gas Workers World's Best Paid at $163,600/Year

SYDNEY - Workers in Australia's oil and gas sector are the highest paid in the world and earn 25% more than U.S. counterparts, according to a new survey that lays bare the pressures facing companies like Chevron Corp. as they invest billions of dollars to meet Asia's booming energy demand.

Australian workers pocket an average of $163,600 a year to work on projects that range from platforms drilling for natural gas in deep water off the northern coast to onshore rigs seeking to unlock deposits of unconventional gas in the sweltering heat of the Australian Outback, the survey by recruitment firm Hays found.

The labor market has tightened as more than $160 billion is invested in Australia's natural gas industry, which has to compete with big mining projects for pipe layers, welders and engineers. As a result, Hays said the bulging pay-packets offered Down Under are even higher for imported workers--coming in at $171,00 a year.

A combination of vast natural gas reserves, a stable political environment and proximity to fast-growing Asian economies have put Australia on course to overtake Qatar as the world's biggest exporter of liquefied natural gas, or LNG, by the end of the decade. Around 12 multi-billion LNG projects are either under construction on its coastline or on the drawing board.

With a population of around 23 million people--less than ten times smaller than the U.S.-- Australia lacks a deep labor pool for major projects and large salaries are often required to entice workers to remote corners of the country.

Spiralling labor costs have already contributed to a series of budget overruns at Australian gas-export projects operated by Chevron, BG Group PLC and Australia's Santos Ltd. In the largest example, Chevron said higher labor costs were partly to blame for a 21% increase in the cost of building the Gorgon liquefied natural gas development to 52 billion Australian dollars ($53.5 billion).

But in a mild positive for developers, the average Australian salary in the oil and gas sector fell 0.7% in 2012 compared to 2011.

Norway is the second most expensive country to hire local workers, with an average annual salary of $152,600 needed for recruitment, Hays said. New Zealand ranks third with a median pay packet of $127,600.

The survey was based on the responses of 25,000 people working across 53 countries. The U.S. ranked fifth with $121,400 for local workers, while Sudan brought up the rear with $31,100.

"The guide does reveal signs of a slowdown in salary growth for both imported and local labour in Australia, which may be a sign that the market has passed its peak in terms of demand for specialist oil and gas skills," said Matt Underhill, managing director of Hays Oil & Gas.

Copyright (c) 2012 Dow Jones & Company, Inc.

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