NEWS ARCHIVE

Woodside's big week

MONEY and petroleum production data will dominate events in the Australian oil and gas sector this week. However, if a provocative blog posted on the website of Melbourne's Deakin University is a guide then <i>Slugcatcher</i> suspects the politics of East Timor will dominate next week.

Professor Damien Kingsbury, a widely recognised authority on East Timor and other parts of Southeast Asia, reckons Saturday is D-day for Woodside Petroleum's long-delayed Sunrise gas project.

According to Kingsbury, who holds a professorial chair in the school of humanities and social sciences, February 23 is the deadline for Woodside to reach an agreement with the government of East Timor over the site of an LNG processing facility.

East Timor, one of the poorest countries on the planet, wants the LNG plant on its half of the island of Timor but Woodside says it is impossible because of a deep subsea trench that lies between the Sunrise gas deposits and the island.

The stand-off between the country and the company has been running for years. Neither side is giving ground despite the attempted intervention of agencies associated with the United Nations and the Australian government.

According to Kingsbury, failure to reach a settlement could trigger the cancellation of the seabed boundary agreement between East Timor and Australia.

The process could start with East Timor cancelling Woodside's involvement with the gas project.

The diplomatic posturing and high-stakes politicking that have marked the Sunrise project and the seabed deals between the two countries makes it virtually impossible for a reasonable man on the outside of the process (and possibly inside the process) to understand what might happen if East Timor pulls the plug on Woodside.

Kingsbury, who appears to be very much on the side of East Timor in the dispute, offers no forecast ahead of the Saturday deadline.

However, he does predict East Timor may seek to renegotiate the seabed boundary, shifting it closer to Australia - "at the median point between Australia and East Timor".

Such a ploy would give it ownership of more Sunrise gas.

There has been little mention of the Sunrise project recently, with research reports focusing on Woodside's other challenges, such as whether to proceed with the Browse LNG project and what might happen with the adventurous investment in the Leviathan gas discovery off the coast of Israel.

The disappearance of Sunrise off analyst radar screens does not, however, mean it has gone away.

It is simply an indication that no one in the finance world and perhaps at Woodside has any idea how the dispute will be resolved and certainly not when Sunrise might be developed.

Massive cost overruns at all LNG projects being developed in Australia means no one really wants to get involved in a project that may not only have budget and construction problems but which may also face political hurdles - such as East Timor unilaterally expropriating anything built onshore.

The problem for Woodside and East Timor is that trust was flushed away years ago when both sides indulged in a spot of name calling.

There have been changes in personnel on both sides in recent years. Woodside's new boss Peter Coleman says he is adopting a softly, softly approach to dealing with East Timor.

That approach will be put to the test next week if Kingsbury's prediction of a Saturday deadline is correct and East Timor cancels its agreement and calls for international arbitration or intervention to force the hand of the Australian government and Woodside.

Before that situation bubbles up into a crisis there is the small issue of Woodside's annual profit scheduled for release on Wednesday, followed on Friday by the profit result of Australia's second biggest oil and gas company, Santos.

Woodside, after a few years in the doghouse thanks to completion delays and a budget blow-out at the Pluto LNG project, is expected to post a strong profit of between $2.7 billion and $3 billion, depending on the treatment of non-recurring items.

Santos is expected to report a profit of between $525 million and $610 million.

The issues to look for in the Woodside announcement are the size of the dividend - which is likely to be increased - and for comment on the Browse LNG project which could go in one of three ways: onshore at James Price Point; offshore as a "floater"; or postponed for more studies.

Of secondary interest will be an update on the Israeli investment and a progress on exploration in Myanmar.

Santos issues to watch are news on the LNG project in Papua New Guinea and a possible reserve upgrade in the Cooper Basin as exploration for unconventional oil and gas accelerates.

However, once the standard financial announcements are out of the way it will be time for everyone with an interest in Australian oil and gas, including the Australian government, to consider what to do about Sunrise and East Timor.

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