March 13 (Bloomberg) -- Santos Ltd., Woodside Petroleum Ltd., and Origin Energy Ltd. may have to delay liquefied natural gas projects in Australia as Chevron Corp.’s Gorgon venture could capture much of the “limited” demand, JPMorgan Chase & Co. said.

Santos’s A$7.7 billion ($5 billion) Gladstone LNG project in Queensland state is now more likely to be deferred as forecasts for gas demand growth in north Asia are cut back, JPMorgan said in a March 12 report. The bank cut its recommendation on Adelaide-based Santos, Australia’s third-biggest oil and gas producer, to “neutral” from “overweight.”

Chevron Chief Executive Officer David O’Reilly reiterated March 10 that the company and its partners, Exxon Mobil Corp. and Royal Dutch Shell Plc, expect to give the go-ahead in the second half to build the Gorgon LNG venture. The delayed project in Western Australia will be able to produce 15 million metric tons a year, about 76 percent of Australia’s existing LNG capacity.

“A Gorgon go-ahead threatens to displace or at least defer competing LNG projects in the region given a deterioration of demand conditions,” JPMorgan analysts led by Sydney-based Mark Greenwood said in the report. “This raises the risk of other projects achieving final investment decisions in their proposed timeframes.”

Roger Martin, a spokesman for Perth-based Woodside, 34 percent-owned by Royal Dutch Shell Plc, declined to comment. Neither Matthew Doman, a spokesman for Santos, nor Lina Melero, a spokeswoman for Sydney-based Origin, could comment.

PNG ‘Well Placed’

Santos’s Gladstone project, Origin’s proposed Australia Pacific LNG venture, also in Queensland, and Woodside’s LNG expansion plans now face “significantly increased competition,” the report said. Exxon’s planned LNG venture in Papua New Guinea, in which Oil Search Ltd. has a stake, is still “very well placed” to be approved for development this year, it said.

The world is estimated to require about 25 million tons a year of new LNG capacity by 2015, with Gorgon capturing 15 million tons of that, while Exxon’s PNG project may take a further 6.3 million tons, JPMorgan said. That may leave room for just one other project to be approved, the report said.

Santos fell 20 cents, or 1.3 percent, to A$15.80 in Sydney trading on the Australian Stock Exchange, while Perth-based Woodside added A$1.80, or 5 percent, to close at A$37.78. Origin advanced 0.9 percent to A$14.14.

North Asia

LNG demand in north Asia was 9.6 percent lower in the fourth quarter than a year earlier, with Japanese purchases down 2.5 percent and South Korean imports down 7.1 percent, Adelaide-based consultant EnergyQuest said in a report today. Chinese imports were down 75 percent, while Taiwanese imports rose 14 percent.

LNG demand in Japan, the largest buyer, could be as much as 10 percent lower this year than in 2008, while South Korean demand may drop by up to 20 percent, JPMorgan said.

Santos and Malaysia’s Petroliam Nasional Bhd. are targeting 2014 for the start-up of their Gladstone LNG venture, followed by Origin and partner ConocoPhillips. Woodside is due to start up its A$12 billion Pluto LNG project in Western Australia in late 2010 and is seeking to develop the Sunrise and Browse LNG ventures.

Inpex Corp., Japan’s largest oil explorer, and BG Group Plc are among rivals seeking to start up LNG units in Australia by 2015.

“We have never believed that all of the proposed LNG projects could go ahead in the targeted timeframe, but we see the window of tight supply becoming shorter, and the number of projects that can proceed in a timely fashion is reducing,” the analysts said in the report.

JPMorgan left its recommendations on Woodside and Port Moresby-based Oil Search unchanged.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Last Updated: March 13, 2009 01:21 EDT