daring to dream on floating lng venture

From Criterion in today's Australian

Cost Oil and Gas (CMT) 13.5c

AS the tanker bearing the $19 billion PNG LNG project’s first load steamed away from the coast last week, this $8 million market-cap junior was daring to dream about the island nation’s next LNG ­venture.

Cost chief Andrew Dimsey admits he was surprised that a concept study deemed the company’s offshore Pandora JV was “technically and commercially feasible’’.

The study’s author, Houston-based engineer Wison Offshore and Marine, proposed two floating LNG concepts to develop the Pandora field, which contains a contingent resource of 800 billion cubic feet of gas. In comparison, the onshore PNG LNG draws from a 10.6 trillion cubic feet ­resource.

Wison costs Pandora at between $US1.15bn ($1.23bn) and $US1.57bn, depending whether the partners opt for an offshore or near-shore alternative.

Dimsey says the economics of FLNG is falling fast, given technology improvement and more widespread adoption. “A lot has been done in Canada but this would be at the smaller end of the scale,’’ Dimsey says.

“We are not shouting out there in the wilderness. There are a lot of people interested in floating LNG and some of them are very heavy hitters.’’

Cost’s joint venturers are the Canadian-based petro-giant Talisman Energy (25 per cent), the PNG-oriented Kina Petroleum (25 per cent) and Santos (10 per cent).

Intriguingly, PNG LNG operator Exxon Mobil and partner Oil Search (OSH, $9.35) held the Pandora permit, along with Talisman. But the parties didn’t develop an adequate work program either because they were preoccupied with PNG LNG or because they didn’t think the permit was much chop.

Cost et al bid for the project, which the PNG government re-tendered in December.

Dimsey envisages a consortium of equipment provider and vessel owner-operator. There’s been keen interest from shipping companies, all of which have active FLNG programs.

We call Cost a spec buy. Less patient types should stick with Oil Search, which yesterday upped production guidance from 14.5-17.5 million barrels of oil equivalent to 17-20mboe.