Maybe VPE is moving because BG is close to making its FID?There...

Maybe VPE is moving because BG is close to making its FID?

There was the following report in the Australian last weekend indicating the decision might be alot close than the end of the year.



Santos, BG closer to coal seam approval for Queensland fields
Matthew Stevens From: The Australian October 23, 2010

THE race to establish Queensland's deep coal seams as Australia's next export energy province has moved another lap closer.

This is because the politically motivated commonwealth environmental pause has been conditionally lifted.

The twice delayed approvals finally confirmed yesterday by Environment Minister Tony Burke should free South Australia's Santos and Britain's BG Group to move to final investment decisions on separate but coincident plans to invest $30 billion in two LNG projects to be built on Curtis Island near Gladstone.

"Should" is the key word here, though. Given the depth of dialogue between the applicants and the ministry in the wake of the former environment minister's pre-election decision to extend the approval process to a more politically amenable moment, both BG and Santos certainly expected Burke to attach meaningful conditions to any sign-off.

But there was just a hint of industry surprise last night at the breadth and complication of some of the approval requirements.

Now, no one is suggesting there are any particular deal breakers among Burke's 300 conditions. But there is certainly a sense that a whole lot of people will be working a whole lot of overtime this weekend to better appreciate what now needs to be done.

Nonetheless, the betting remains strong that BG Group will be the first to move to sanction a final investment decision, though yesterday's speculation that Julia Gillard and Anna Bligh would join some kind of signing ceremony in Gladstone as early as next week seems a bit ambitious.

It is said BG has got close to sign-off before but never smoked the cigar. The story goes that BG boss Frank Chapman flew into Australia in June to sign off on some kind of deal with former prime minister and proud Queenslander Kevin Rudd.

Unfortunately for both Rudd and Chapman the timing was very poor. While Chapman waited with pen at the ready, Rudd was deposed and BG's man returned home, doubtless disappointed and not a little confused at the ruthlessness of Australian politics.

The board of Santos is expected to confirm a final investment decision some time nearer to the Melbourne Cup when it is also expected to confirm a long-proposed sale of a chunk of its LNG future to Kogas, Korea's national gas company.

Kogas is also expected to be confirmed as a major customer of the Santos project in a move that will content the market because it will introduce an end-user to its customer base.

Santos has so far contracted 2 million tonnes per annum of the 7.2mtpa it plans to produce from the first two trains it plans for Curtis Island and it is expected Kogas will sign up to something pretty close to the balance.

BG, meanwhile, has locked up a range of Asia-Pacific contracts totalling 8.3mtpa that can be filled with Queensland LNG, which more than accounts for the 7.4mtpa of frozen, condensed export gas that will be pumped out by its Curtis project (which sits next door to the Santos property, but slightly further from the ocean).

The need for speed is predicated on the belief that there is considerable strategic advantage in being first to build in Queensland's new LNG space.

As things stand there are four and possibly five discrete LNG projects on Gladstone's drawing board. But financial, resource and political realities suggest these plans will eventually be consolidated into two or three LNG hubs.

It would seem likely then that other majors in the Surat coal-seam sector, including Shell and Origin Energy, along with its US partner Conoco Phillips, are eventually going to have to talk to the first-movers if they are going to translate their coal-seam resources into export dollars.

Earlier this year Shell and Santos confirmed that they had held preliminary discussions over some kind of infrastructure sharing and, while it seems those talks are now on the backburner, it would seem the Bligh state government is very, very keen to engineer the sort of site sharing common in LNG projects elsewhere.

Meanwhile, Treasurer Andrew Fraser hit the LNG nail on the head yesterday when, ahead of Burke's decision, he suggested the Curtis Island hubs were a "once in a generation opportunity to provide a generation of employment".