SYDNEY, May 8 (UPI) -- Back in 1984, when Woodside Petroleum found the Timor Sea's biggest natural gas field 500 feet underwater and 300 miles north of Darwin, it probably seemed like all of Australia's Christmases had come at once.
Here was a reserve that would keep the nation supplied with gas for years to come and provide much needed jobs for Australia's sparsely populated "top end".
Now, the benefits that will flow to Australia from the dormant Sunrise field are far less certain.
A battle royal has just opened up over the spoils from the 8.4 trillion cubic feet of gas and 300 million barrels of condensate (a low grade of oil), with a strong possibility the main beneficiary will be U.S. consumers.
In one corner are three of the joint venture partners -- Woodside, Shell and Japan's Osaka Gas -- which entered an agreement in 2000 to develop the gas field.
Slugging it out with them are the fourth joint venture partner, Phillips Petroleum of the United States, which is developing the nearby Bayu-Undan oil and gas field, and the government of the Northern Territory, Australia's least populous state.
The battle is over where the gas will go. Woodside, Shell and Osaka contend that Australia has no demand for the gas and that the only profitable way to unleash it is to convert it to liquefied natural gas and export it.
They propose to do this from a massive on-site barge carrying processing and storage facilities and ship the LNG directly to markets on the U.S. West Coast where Shell is positioning to grab a dominant stake in the gas market.
"Since 1995 the joint venture partners have spent $100 million to see if it was feasible to commercialize the gas. We explored all options, and will continue to do so, but right now the floating plant is the best option," Woodside's Mike Lane told United Press International.
A floating barge has never been built before, and this first one would be huge -- measuring 700 by 100 feet -- and cost $2.5 billion. It would be built in an Asian shipyard.
It's a risky business. Well, that's what Phillips is saying, but it would be. Phillips wants the gas piped to Darwin, as was previously proposed. It favors this so-called "onshore option" because it would gain economies by piping the gas to Darwin together with the gas from its Bayu Undan field. Phillips also believes the prospects of longer term gas contracts in Australia are less risky than the spot LNG market in the United States.
The pipsqueak in this battle of the titans is the Northern Territory government, which regards the onshore option as critical to the state's economic development. The territory, which occupies one-sixth of Australia's land mass but has only 200,000 people, has an economy based almost entirely on tourism and Federal government largesse. Its claim to fame is Uluru (the world's largest rock), Kakadu World Heritage Area and killer crocodiles. It's also the place where a dingo made off with a baby called Azaria, made famous in a movie called Evil Angels, starring Meryl Streep.
The state's chief minister, Clare Martin, has been campaigning for Shell and Woodside to return to the pipeline option, on "national interest" grounds. "The resources of the Timor Sea belong to the Australian and East Timorese people. It is in the national interest that these resources be brought onshore for development and use," Martin said recently.
"Under the Shell/Woodside proposal there would be minimal jobs for Australians, no chance for industrial development in Darwin, and no gas for the rest of Australia. Australia may get royalties but no value-added," she says. "It would be a reversion to the old days when developers saw Australia just as a mine or a quarry."
Martin supports her claim by citing a government-funded study which estimates that gas onshore means 4,400 more jobs for Australians, $50 million a year in extra government revenue, and $7 billion more in economic benefits over the project's 20-year life.
She also quotes Woodside director of new ventures, Agu Kantsler, who last week told the Australian Petroleum Production and Exploration Association there is an urgent need for more gas in Australia as the nation is facing a rapid decline in crude oil self-sufficiency that could lead to massive rises in petrol prices and create a national balance of trade nightmare within just a few years.
So she may well have a point.
Is it David vs. Goliath? "Very much so," Jane Munday from the Office of Territory Development told UPI. "We're a small economy but the project is a critical part of our future. We're appealing to them to do the right thing."
Sorry, but who do Munday and Martin think they're dealing with? Sure triple-bottom line accounting -- in which social and environmental factors are considered -- is all the rage, but everyone knows which bottom line holds sway.
"Clare Martin's out of her depth," a leading energy analyst who asked not to be named, told UPI. "I don't think she fully appreciates the issues. Right now, there is a lot of gas around the world seeking a home. A government can't step in and tell companies how to produce and where to produce it. It's their business. The more it interferes, the less likely it is the project will go ahead."
And as for the national interest, Shell spokesman Antonius Papaspiropoulos told UPI: "The point we make is that the national interest is well served by the floating plant. When it gets up, there will be $4 billion in Federal taxes and $17 billion in export revenue over the life of the project."
So far, the Federal government has refused to enter the debate, much to Martin's chagrin. She is lobbying it to chip in with the $500 million Shell says the pipeline will add in costs to the project.
The other player in all this, East Timor, the world's newest and poorest nation, which lies 120 miles north of Sunrise, is so far content to watch from the sidelines. "Timor is happy to take whatever revenue comes its way," says Papaspiropoulos. "Shell will also be helping it with a raft of economic, social and environmental benefits when the project gets up."
The final decision on which option is built rests with the joint venture partners, but the odds are stacked heavily in favor of the offshore option. Though an unanimous decision is required before the project can start, the likelihood of that is pretty high. "You have to be positive that we can reach an alignment," says Woodside's Mike Lane.
So, you energy-guzzling west coasters, as you snuggle down to your central heating some future winter, spare a thought for us Aussies. It could be our cheap gas that's keeping you warm.
