Trading house's move will deliver Bass oil direct to Japanese...

Trading house's move will deliver Bass oil direct to Japanese homes
Nigel Wilson, Energy writer
August 11, 2007

OIL from Bass Strait is set to be sold directly into the Japanese market following the surprise emergence of trading house ITOCHU in the Basker/Manta/Gummy joint venture.

Existing partners, operator Anzon Australia and its 50 per cent venturer, Beach Petroleum, have each sold 10 per cent stakes for $123 million each.

ITOCHU will take 20 per cent of the joint venture for $246 million, which values the Basker/Manta/Gummy development at more than $1.2 billion, or about double most analysts' estimates.

The ITOCHU move continues the trend of Japanese and Chinese companies seeking a direct stake in Australian oil and gas projects to offset dependence on Middle East suppliers.

It is understood three Japanese corporations including Mitsui, which recently sold its Australian Wandoo Petroleum business to Arc Energy and the Canadian group, Vermillion Oil and Gas, tendered for the Basker stake.

Anzon and Beach decided to seek support from overseas companies after a disagreement earlier this year led to the joint venture pulling off a $600 million gas supply deal with Alinta for electricity generation in Tasmania.

At the time, Beach's managing director, Reg Nelson, said he did not want his company too exposed to a single project.

Anzon's executive chairman, Steve Koroknay said yesterday the ITOCHU deal would allow the joint venture to develop the gas leg of the project.

But he noted also that ITOCHU was considering identifying new oil markets in Asian countries including Japan.

A statement released in Tokyo by ITOCHU said the transaction would add approximately 2000 to 3000 barrels a day in production to the Japanese company's balance sheet towards the end of the year.

"It is a strong commitment of ITOCHU to continue exploration and development activities in Australia and this participation is a key milestone in achieving such an objective," the Japanese company said.

ITOCHU added it was planning to invest more than 40 billion yen ($391 million) in the purchase and development of upstream oil and natural gas businesses in Australia.

The innovative $330 million oil project, the first in Bass Strait to be developed outside the ESSO Australia/BHP Billiton Petroleum venture, involves using a floating production storage and off-take vessel processing about 15,000 barrels a day supplying shuttle tankers to Australian refineries.

The fields are estimated to contain around 40 million barrels of proven and probable oil reserves and up to 77 million barrels in proven, probable and possible (3P) reserves.

According to the Victorian Government there is a condensate resource of 19.3 million barrels and 385.4 petajoules of gas.

The oil project has currently a 15-year life expectancy, three times original estimates.

Mr Nelson said yesterday ITOCHU brought significant technical and financial strength to the joint venture.

Up to six new wells are scheduled to be drilled in the fields beginning with Basker-6 early next year.