Hi Blurrt. You have raised some interesting points. It is coming...

Hi Blurrt. You have raised some interesting points.

It is coming to a point where MEO need to start tying things up and I am sure the MEO team are pushing to that end. It must be difficult trying to lasso all the stallions when there's someone running around with a pair of shears and keeps on cutting the rope.

The stalling factor is the processing plants in Darwin vs TS. Santos and Conoco will always favour their land based plant which is why NT/P61 (Caldita) and NTP/69 (Barossa/Lyndoch) and, to a lesser extent, Evans Shoal have been in limbo for so long. Neither JV will build a pipeline so is lack of cohesion between the PPs preventing the move forward?

In ES the high CO2 content is a problem as Petronas, Shell and Osaka will participate in the field development and sell the gas but are not interested in being involved with the Methanol production.

I have not been able to find much technical information regarding Caldita/Barossa but we do have Boydy88's link:

conocophillips selling caldita/barossa fields

and investq's reply that the gas has 16% CO2 content (thanks for the info guys).

From this we must assume that Conoco (60% and operator) have no interest in the permit any more but Santos (40%) say they are keen to develop the field. I am not sure of the structure and quality of the C/B trap but the fact that the gas contains 16% CO2 means that it is getting out of LNG quality range. Santos is in the process of selling its share of ES because, I believe, the high CO2 content not conducive to LNG production. They are keeping quiet re the Conoco sale but I wonder if any new operator will be willing to build a pipeline to Darwin when the cheaper TS option is available.

We have to remember that the C/B gas is 16% CO2 which may be too high for LNG production. At a pinch it could be an ideal complement for any Heron gas for the TSLNG project as any CO2 stripped would feed the TSMP. Alternative disposal of the CO2 from a land based plant could be a problem.

I agree with investq's summary that, if 'it is hard to see much more than 1Tcf in this field of 16% CO2 gas', it is not sufficient to warrant the cost of a pipeline to Darwin. Perhaps this is why Conoco are selling and the potential buyer would have pulled out of the deal.

Supply of the Caldita to the TS projects, being more cost effective, is another matter.

So where does that leave us.

Santos selling their interest in Evans Shoal because of the high CO2 content. The other ES participants are presumably willing to contribute to developing the wells to sell the gas but not the infrastructure of Methanol production.

Magellan have been given an extension to the purchase of Evan's Shoal and must be finding it difficult to tie the deal together. The 7Tcf gas would be sufficient to supply 5 TS Methanol modules or 8.75mtpa for 20 years. Magellan will need to find the funding to 40% develop the wells (or farmout) Then they will need to find new partners to fund the pipeline to Darwin and build the Methanol plant after going through the lengthy, and uncertain, business of securing approval for the land based plant.

Magellan have FIRB approval for the transfer of Santos' 40% stake but in 2008 settled a

AU$14.6m dispute with the ATO

so perhaps they will be under higher scrutiny.

MGN are not over the line yet but as a carrot to the ES PPs to continue with development, and, by way of funding their ambitions in Darwin, a wise move, IMO, would be to sell a portion of the gas to MEO for the TSMP. 1.4Tcf would be sufficient feed for one module to produce 1,750,000 tonnes per annum for 20 years of operation. This would give the ES JV an instant income and still leave them 5.6Tcf for the Darwin plant.

Conoco are selling its share of Caldita/Barossa but only if it is sent to their plant in Darwin. Santos say they are willing to develop the field but I wonder about this, especially when we look at the size of the field and high CO2 content. Perhaps they want to develop the field but not participate in the pipeline to Darwin (ref ES) so, for the purchaser, the conditions are a no-brainer. I am not sure if MEO would want to get into bed with Santos again in any case.

The other stranded gas in the region is the everlasting story of Sunrise and their FLNG vs pipeline to East Timor solution which has been in stalemate for some time. Abadi is in Indonesian waters so that would not be a rosy nest either.

The Chuditch field was discovered by Shell in 1998 and is reported to hold .7Tcf gas with high CO2 content. I am not sure what is happening there.

A list of wells in the area can be found here.

MEO, hopefully, have sufficient LNG quality gas in Greater Heron (potentially 5Tcf) for the TSLNG project. The project requires approximately 3Tcf of gas to operate for 20 years.

One TSMP module requires 1.4Tcf raw gas to operate for 20 years. MEO's plans are for two modules. One of these plants could be supplied by Blackwood and the other from alternative stranded gas in the region. I have noted my theories about ES above and if MEO don't buy into the permit, hopefully they can get guaranteed supply from them.

The ES solution would be better initially as the resource is proven and would be the catalyst to get the projects underway. It is in MEO's interests to build the Methanol plant first so it is then prepared to deal with the CO2 stripped from the Heron LNG process.

We don't know what might happen with the other stranded gas in the area either, especially, with the use it or lose it clause by the Oz Government. There is also the need for the government to encourage the reduction of carbon emissions. After giving approval for the TS projects it would be a shame to see such a neat solution for the partial development of the Bonaparte Basin go to waste.

It has always been a very ambitious project and quite a few things need to fall in place for it to work. The main requirement, though, is a guaranteed gas supply.

One last thing is the funding. MEO are going to need committed partners with deep pockets to get the show on the road. You mention Clive Palmer, Blurrt, and I was just reading the other day that there are rumours he is preparing to float Resourcehouse on the HK market for $3b. The 2008 Strategic Alliance was dependant on that float and I wonder if a JV with MEO is still in his sights or is he just satisfied with his other projects.

The whole process is a long term plan and the MEO team will keep patiently chipping away until the projects start taking shape.

I think we have to be patient too and not panic. After all, the SP cannot go down much further and management is not squandering the funds it has worked so hard to accrue. There are a number of talented people working on the solution for us.

With so many disappointments in the past it is sometimes difficult to see the way forward. Let's hope the Year of the Rabbit will see us more prosperous.

We have been expecting so much over the last few years. Perhaps this is the year to expect the unexpected.

I hope so anyway.

#:>))