The third-largest U.S. oil company, ConocoPhillips (COP) and its partner Origin Energy Ltd. received approval from Australia’s Queensland state for their proposed $35 billion Australia-Pacific liquefied natural gas (APLNG) joint venture.
The project, which is subject to a several restrictions, includes a process to transform coal seam gas to liquefied natural gas (LNG). The APLNG joint venture finally won the Queensland approval to develop a gas field between Injune and Millmerran over a 30-year period.
The joint venture includes the construction of a 450 kilometer transmission pipeline to Gladstone along with an LNG facility on Curtis Island. Additionally, a coal seam gas water-management plan will be set up with a ground water monitoring strategy in order to meet environmental demands. The LNG project is now awaiting the environmental green light from the federal government.
The project is eyeing Asian markets for its produced LNG. The companies have already started discussions with potential LNG buyers and plan to reach to a final agreement before the end of 2010.
Notably, a similar joint venture project between BG Group plc and Santos Ltd. got the approval from the federal body last month for their Queensland venture. Despite 1,500 conditions imposed by state and federal governments to protect the environment and underground water supplies, BG Group plc intends to invest $15 billion to build its Queensland LNG project.
Another LNG assignment by Arrow Energy Ltd. is set to reach a final investment decision in late 2012 or early 2013, but is pending environmental clearance from both Queensland and federal governments.
Although Conoco’s third quarter production was slightly below the year-earlier level, the company is expecting strong production volumes going forward from major projects in offshore Southeast Asia, LNG projects in Australia, Canadian SAGD oil sands projects and Lower 48 shale development projects.
Conoco currently holds a Zacks #4 Rank (short-term Sell rating). However, our long-term Neutral recommendation remains unchanged at this stage.
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