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East Timor Plans Gas Plant Study Amid Woodside Clash

June 24 (Bloomberg) -- East Timor plans to spend $3 million studying the option of building a plant in the country to process gas from the Sunrise project operated by Australia’s Woodside Petroleum Ltd., Prime Minister Xanana Gusmao said.

The Southeast Asian nation has already commissioned a report which found that a pipeline stretching from the Sunrise gas fields to East Timor’s shores was “technically feasible,” Gusmao said in a budget speech e-mailed to Bloomberg today.

East Timor, seeking additional revenue sources to boost its economy, continues to clash with Woodside over how to develop the Sunrise liquefied natural gas venture. A gas plant in East Timor would generate jobs and “catapult” the economy, President Jose Ramos-Horta said yesterday while on a visit to Australia’s capital, Canberra. East Timor demands more detailed analysis of the costs of the development options.

Woodside and its partners, including Royal Dutch Shell Plc, have said that a floating plant in the Timor Sea is the best commercial option and would deliver the most revenue to both Australia and East Timor. Woodside, Australia’s second-largest oil and gas producer, has ruled out piping the gas to East Timor because it estimates that would cost about $5 billion more.

“The commercial assessment has determined that floating LNG is the most attractive development,” De la Rey Venter, the global head of LNG at Shell, said today in an interview in London. He declined to speculate on the East Timor plans and referred further comments to Woodside.

Different Agendas

The Perth-based company and East Timor have different agendas, Adrian Loh, who covers Woodside as associate director at DnB NOR ASA in Singapore, said today in an e-mailed response to questions. “I think the negotiations will be protracted.”

Woodside declined 0.2 percent to A$44.56 in Sydney trading, while the benchmark S&P/ASX 200 Index fell 0.1 percent.

The floating LNG plan must be approved by the East Timorese and Australian governments. Sunrise straddles a boundary between Australian waters and an area jointly managed by the two nations. Woodside and partners have exclusive rights to develop the field.

East Timor depends “almost exclusively” on oil revenue from the Bayu-Undan project run by ConocoPhillips, Ramos-Horta said yesterday. The nation’s fund set up to manage its oil and gas income rose to $5.9 billion at the end of April from $5.4 billion at the close of 2009, the prime minister said today.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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