Timor-Leste buys Shell’s stake in Greater Sunrise gas field

Nov 29, 2018

Timor-Leste is set to become the majority owner of the Greater Sunrise gas field after taking Shell’s 26.56% stake for US$300 million (AUD$415 million) following on from an earlier buy-out of ConocoPhillips’ 30% stake for $350 in early October.

The only remaining owners are Woodside Petroleum (33.4%) and Osaka Gas (10%), with the Timorese government potentially in a strong position to push for its development concept which would see gas sent onshore to a processing plant in the southern part of the nation.

Over the past decade, Shell and Woodside preferred a floating LNG concept, but more recently reverted to an earlier plan to pipe the gas to Darwin in the Northern Territory. The FLNG concept was also nixed when Australia and Timor-Leste signed a maritime boundary agreement earlier this year in New York, after a ruling from the Permanent Court of Arbitration in The Hague, which is yet to be ratified.

A Woodside spokesperson told Energy News the company was aware of the deal and has a “strong relationship” with the country. Woodside cautioned in October the JV held “certain rights that may or may not be exercised in such circumstances”, meaning it could veto the sale, which was reiterated by the spokesperson.

Under the production sharing contract terms, if the gas goes to Darwin, Timor-Leste will earn 30% of the royalties, which drops to 20% if it goes to Timor-Leste. Despite this, Dili has argued hard in favour of the latter, nation-building option led by special envoy, and former prime minister and president Xanana Gusmao.

Shell Australia chair Zoe Yujnovich announced in a joint statement that the sale aligned with Shell’s global strategy to become a simpler and more resilient company. Shell moved out of New Zealand earlier this year after a century and has been working towards spinning off US$30 billion worth of assets since its merger with BG Group.

“Although we formed different views about the optimal development scenario, we understand the priorities of the Timor-Leste government and wish it well in pursuing its aspirations to develop this important resource for the nation,” she said.

This is not far off what ConocoPhillips Australia West president Chris Wilson said in a statement after the company agreed to sell its stake earlier this year, also noting differences on “the proposed economic development option” but that ConocoPhillips saw the importance of the gas field’s development to the small nation and hoped “the sale of our interest to the government allows them to progress their vision for the development of Sunrise”

Gusmao said his nation “appreciates Shell’s willingness to sell its interests in the Greater Sunrise project”.

“Shell’s attitude throughout the negotiations shows that it is ready to consider not only its commercial interests but also the interests of small nations,” he said.

“Timor-Leste sees Shell as a good partner and friend, and far from ending the relationship between the two parties this transaction instead reaffirms our commitment for the future,” he said, but did not expand on what the future relationship could be.

Woodside said “the new Timor Treaty has the potential to unlock Greater Sunrise provided that the underlying arrangements, including the new Greater Sunrise Production Sharing Contracts and agreed fiscal regime, are on terms and conditions equivalent to the existing arrangements and give the Sunrise Joint Venture the fiscal and regulatory certainty necessary for a commercial development to proceed”.

“The Timor LNG plan was assessed as part of the United Nations Compulsory Conciliation, and found that it in order to be viable it would need a US$5.6 billion subsidy. So where that money will come from is a significant question.” The national sovereign wealth fund holds an estimated US$17.1 billion and is one of the main sources of wealth for the nation, which has only been independent for fewer than two decades.

The Greater Sunrise fields are estimated to hold contingent resources of 5.13 trillion cubic feet of gas and 225.9 million barrels of condensate believed to be worth about A$53 billion – nearly 30 times Timor-Leste gross domestic product.

The future of the Sunrise gas field will be discussed by the Timor-Leste Minister of Petroleum and Mineral Resources at the Timor-Leste Breakfast on Friday 15 March at the Australasian Oil & Gas Exhibition & Conference. For more details, visit our website or register for a free AOG visitor pass, here

Credit: ENB Aspermont

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