Nov. 5 (Bloomberg) -- Hess Corp., the fifth-biggest U.S. oil company, is considering several options including a floating liquefied natural gas facility to develop its reserves off Western Australia, a company official said.

Hess is assessing the size of the deposit as it holds talks with potential partners including Woodside Petroleum Ltd., Chevron Corp. and Royal Dutch Shell Plc, said Aidan McKay, the company’s vice president of production in the Asia Pacific.

“LNG producers are approaching us as we have the gas,” McKay said at the Oil & Gas Outlook Asia conference in Singapore yesterday. He declined to comment on the size of the deposit or when the appraisal would be completed.

Woodside, operator of the A$12 billion ($11 billion) Pluto LNG project in Western Australia, and Chevron are seeking partners for proposed gas processing plants. Shell is ordering floating LNG production units to chill natural gas to liquid form and export the cleaner-burning fuel from the Prelude and Concerto discoveries off the coast of northwestern Australia.

Apache Corp. and Kuwait Foreign Petroleum Exploration Co. ended talks last month to supply gas to Woodside’s Pluto project, in favor of Chevron’s neighboring Wheatstone venture, a sign of competition for Western Australian gas resources.

Woodside’s plans to expand Pluto may cost A$3 billion ($2.7 billion) more because of the expense of securing alternative supplies, JPMorgan Chase & Co. said last month.

Floating LNG

Apache’s decision has no bearing on Hess, which is looking for the most attractive opportunity to commercialize its gas reserves, McKay said. New York-based Hess may select a partner that is pursuing floating LNG, such as Shell, he said.

Hess last year beat 10 rivals for the WA-390-P permit, with a A$501 million ($454 million) commitment to drill 16 wells within three years, making it the most-expensive license to be awarded in Australia. Hess plans to drill 12 wells in the permit during the next 12 months to further appraise the field, Chief Executive Officer John Hess said in July.

The permit lies to the southwest of the Gorgon and Jansz gas fields, which hold 40 trillion cubic feet of the fuel and which Chevron aims to develop for LNG exports.

Hess plans to increase output from its areas in Southeast Asia to 100,000 barrels a day of oil equivalent in the “medium term” from about 85,000 now, McKay said today. Total oil and gas production rose 16 percent from a year earlier to 420,000 barrels of oil equivalent a day in the third quarter, Hess said last month.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net

Last Updated: November 5, 2009 00:01 EST