Woodside’s Sunrise still a long shot in East Timor, plate tectonics in focus

Improvement of the 5.1 trillion cubic ft Larger Dawn fuel and condensate discipline is again on the agenda for Woodside Vitality (ASX:WDS), however the odds of progress look as troublesome as ever, reported EnergyQuest. Considerably, all stakeholders in Dawn ought to be speaking about plate tectonics moderately than economics, recommended the consultancy in its newest report.

In April, the chief government of Dawn operator Woodside, Meg O’Neill, referred to as for “critical consideration” to be given to re-starting improvement of Dawn as many nations scramble for alternate options to Russian fuel provide.

Woodside has a 33.44% stake in Larger Dawn. East Timor’s nationwide oil firm Timor GAP holds 56.56% after shopping for out Shell and ConocoPhillips in 2018. Japan’s Osaka Fuel holds the steadiness of 10%.

About 70% of Larger Dawn – consisting of the Dawn and Troubadour fields – lies in East Timor’s (often known as Timor Leste) seabed following a 2018 maritime boundary take care of Australia. The fields are solely about 150 km south of Timor Leste’s shoreline however in between lies the three,300 metre-deep Timor Trench, famous EnergyQuest.

Because the consultancy highlighted “the perennial situation for Dawn is the insistence of the Timor-Leste authorities on onshore processing. One of many biggest champions of this proposal is independence hero and Nobel prize winner Jose Ramos-Horta, who was re-elected as president in April 2022.”

Swinburne College’s Professor of politics and worldwide relations, Michael Leach, mentioned the re-election of Ramos-Horta was step certainly one of a two-step plan to put in the nation’s first president, Xanana Gusmao, as prime minister and resurrect the onshore liquefied pure fuel (LNG) processing plan, based on a report in The Australian on 25 April.

Nevertheless, whereas the Australian media have pedalled that narrative since Horta’s presidential victory, Vitality Voice understands that the brand new president may take a extra pragmatic view to the event of Dawn. Horta will likely be no pushover with regards to Gusmao, although the latter is a towering determine of Timorese politics and has raised unrealistic expectations of employment alternatives and financial advantages from piping Dawn fuel to East Timor for processing.

In the meantime, Woodside’s O’Neill stays adamant that onshore processing shouldn’t be viable. “Yeah, that may be a key problem. The economics of taking fuel to Timor-Leste and constructing new crops simply are prohibitive – in order that’s one thing that should get cracked – however the PSC phrases have to get sorted first,” she instructed the Australian Monetary Evaluation in April. O’Neill additionally mentioned there have been “doubtlessly some attention-grabbing alternatives” to make use of present LNG amenities, which suggests talks could possibly be underway between INPEX and, or, Santos as operators of Ichthys and Darwin LNG respectively in Northern Australia, mentioned EnergyQuest.

Certainly, the settlement on production-sharing contract (PSC) phrases are essential earlier than any improvement plans for Dawn can proceed. However as one trade supply instructed Vitality Voice “the management of East Timor’s Nationwide Authority of Petroleum and Minerals (ANPM) appears extra eager about flying around the globe selling its proposed carbon seize and storage (CCS) hub at Bayu Undan, moderately than specializing in finalising a PSC for Dawn, which arguably ought to be a high precedence for the upstream regulator. That’s its job.”

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Plate Tectonics Not Economics Key to Dawn Debate

EnergyQuest suggests it might be much more productive for all events to speak about plate tectonics moderately than the economics of processing fuel in Australia or East Timor. “The Indo-Australian plate strikes north at 7 cm a yr and is subducted into the Timor Trench and different plate margins to Australia’s north. Because of this within the 20 or so years of stalled negotiations over Dawn improvement, the space between Australia (together with Larger Dawn) and Timor-Leste has shrunk by about 1.5 metres. It will shrink once more by this a lot over the lifetime of the undertaking. Constructing a pipeline (to Timor Leste) subjected to the total drive of probably the most speedy tectonic plate actions on the earth is an thought that ought to by no means have gotten off the bottom. Considered from a perspective of plate tectonics, onshore processing in Timor-Leste has all the time been an pointless impediment to improvement.”

Dawn improvement can also be hampered by the reluctance of multilateral finance businesses and different lenders to finance fossil gasoline initiatives, famous the consultancy.

Pragmatism Prevailing in East Timor?

Over the previous decade or so, East Timor’s leaders have doggedly insisted that Larger Dawn ought to be developed on their dwelling soil. Xanana Gusmao, the nation’s de facto energy dealer when TimorGap purchased out Shell and ConocoPhillips in 2018, hoped the $650 million buyout would put extra impetus behind the nation’s plans to construct a greenfield onshore LNG export facility on its south coast, moderately than use a longtime plant in northern Australia, to monetise the fuel. The Dawn undertaking was the centrepiece of East Timor’s strategic improvement plan formulated in 2011 by Gusmao and his political celebration Nationwide Congress for Timorese Reconstruction (CNRT).

However Woodside and most trade analysts have all the time insisted the economics of a greenfield improvement in East Timor don’t work and that reusing present infrastructure in northern Australia is the one viable path to monetise Dawn.

In 2020, it was reported that East Timor was reassessing its bold petroleum improvement plans, which included the Woodside-operated Larger Dawn undertaking, after discovering the financial evaluation behind its proposed schemes was inaccurate. Eventually pragmatism gave the impression to be prevailing in Dili.

In Might, the ANPM instructed Vitality Voice that it accepts a standalone Dawn improvement in East Timor shouldn’t be viable, nonetheless it now hopes different developments comparable to Chuditch, could possibly be tied collectively to create economies of scale for a home processing plant.

Nonetheless, if EnergyQuest’s level about plate tectonics holds true any dialogue about investing in an onshore LNG export advanced in East Timor, related by pipelines throughout the deep Timor Trench, is moot.

Oil and Fuel Revenues Dwindling

East Timor is now confronted with an finish to its revenues from Bayu-Undan, its sole producing discipline, in as little as six months from now. Operator Santos reported on 21 April it anticipated manufacturing to finish in late 2022. The undertaking produced 2.0 MMboe in Q1 2022, lower than one third of the 6.5 MMboe produced in Q1 2021. Nevertheless, as EnergyQuest famous, a lot greater costs imply the decline in gross sales income has been comparatively modest over the identical interval – US$179 million in Q1 2022 in comparison with US$237 million in Q1 2021.

Regardless of, revenues from oil and fuel more likely to cease fully inside the subsequent 6-12 months, it appears the ANPM stays obsessive about an enormous CCS undertaking, proposed by Santos, moderately than pushing the event of Dawn, which may generate vital revenues for the nation. Alternatively, the CCS undertaking is unlikely to generate a variety of earnings for East Timor.

The federal government will definitely get some revenues from Santos for the CCS undertaking, though the quantity could be lower than its earnings from upstream oil and fuel manufacturing, Sohini Chatterjee, a CCUS and world upstream analyst at consultancy Rystad Vitality, instructed Vitality Voice beforehand.

Certainly, sources instructed Vitality Voice that Santos is discussing paying East Timor a yearly storage payment of $20 million in relation to the CCS hub. However neither the ANPM nor Santos have publicly commented on the industrial preparations.

A senior analysis analyst at an funding financial institution that covers Santos, instructed Vitality Voice, that “the issue is CCS does probably not generate profits, so there won’t be many {dollars} to share round.”

Nonetheless, the ANPM is hoping East Timor will generate profits from carbon credit score markets, though for now it appears unsure how this may work.

However, Australia’s second largest oil and fuel producer, Santos (ASX:STO), is racing to develop the virtually depleted Bayu Undan discipline, offshore East Timor, right into a CCS facility estimated to price over $1.7 billion. In flip, East Timor hopes to host the primary service provider CCS scheme of its type in Asia Pacific to retailer different nations’ waste.

Santos eyes cheaper carbon storage offshore East Timor at new $1.7bn APAC hub

Irony, and The Finish of Bayu Undan

The tip of manufacturing on the historic Bayu Undan discipline by late 2022 means there will likely be about 2.5 years of zero cargoes from the Darwin LNG export facility earlier than shipments of Barossa fuel – which is able to backfill the plant – begin, famous EnergyQuest. The Santos-led Barossa improvement in Australia stays on schedule and on funds for first manufacturing within the first half of 2025.

The irony is that Larger Dawn fuel may have simply been despatched to backfill the Darwin LNG plant. Crucially, findings from a UN-backed Conciliation Fee in 2018 confirmed that improvement of Larger Dawn oil and fuel in East Timor was unviable, opposite to what East Timor’s authorities claimed on the time.

Conversely, the evaluation discovered that sending Larger Dawn fuel to Darwin for processing was commercially engaging. The Woodside-led three way partnership, which in early 2018 included ConocoPhillips, Shell, and Osaka Fuel, may have reused the prevailing pipelines from Bayu Undan and present export plant in Darwin, considerably reducing prices. Larger Dawn fuel may then have competed with enlargement initiatives in Qatar, the US, and Papua New Guinea (PNG) for brand new prospects put up 2023. It was a major alternative that these skilled world oil and fuel gamers had recognized.

However this was to not be. The Gusmao-led authorities of the time spat the dummy in response to the UN-led fee’s findings. The federal government, decided to construct a greenfield oil and fuel advanced in East Timor, no matter the associated fee, instructed TimorGap to purchase out Shell and ConocoPhillips from the Dawn enterprise.

Since then, in 2018, Larger Dawn has moved no nearer to improvement. There haven’t even been any phrases agreed for a production-sharing contract (PSC), which is a vital requirement for any undertaking to proceed. Sadly, it appears Dawn will stay an everlasting lengthy shot. Little doubt, Shell and ConocoPhillips couldn’t consider their luck when East Timor provided them a really favorable exit from the long-stalled Larger Dawn.