Hess May Consider Australian LNG Plant After Further Drilling

By Angela Macdonald-Smith

July 31 (Bloomberg) -- Hess Corp., the fifth-biggest U.S. oil company, signaled it may seek to build a multi-unit liquefied natural gas project in Australia should its exploration program make enough discoveries.

Hess found gas at the first two wells in its exploration program off northwest Australia and will consider options for commercializing the finds later this year once the next two wells have been drilled, John O'Connor, president of exploration and production, said yesterday.

The New York-based company last year beat 10 rivals for the WA-390-P permit, with a A$501 million ($473 million) commitment to drill 16 wells within three years, making it the most- expensive license to be awarded in Australia. The permit lies to the southwest of the 40 trillion-cubic-feet Gorgon and Jansz gas fields, which Chevron Corp. aims to develop for LNG exports.

``If it turns out that 390-P offers an LNG development opportunity, I would expect it to be competitive into that market,'' O'Connor said on a teleconference after second-quarter earnings. ``I am careful not to get myself ahead of the drilling results, but I would say that, in my experience and I think it is borne out by other manufacturers of LNG, you get benefits of scale when you have more than one train.''

Woodside Petroleum Ltd., operator of the North West Shelf LNG venture, Inpex Holdings Inc., Chevron and Royal Dutch Shell Plc are among companies seeking to develop fields off Australia's northwest coast for LNG production. In total, 23 LNG ventures have been proposed for the Australia and Pacific region, Wood Mackenzie Consultants Ltd. estimates.

`Healthy Market'

Hess doesn't consider the number of competing LNG ventures in Australia as a potential obstacle to developing its own project, should the permit hold enough gas, O'Connor said.

``I would not really visualize the Asian market as having queuing for LNG'' projects, he said, according to a transcript of the call. ``I think there are a variety of competing alternatives to move LNG into a very healthy market.''

Hess found gas at the Glencoe-1 well in June and in the Briseis-1 well earlier this month. The gas found in the first well had ``minimal'' amounts of the contaminant carbon dioxide, while the analysis of gas samples from the second well, which targeted different petroleum-bearing sands, haven't been received yet, O'Connor said.

The company can't yet narrow its earlier estimate that the permit may hold between 2 trillion and 15 trillion cubic feet of gas, he said. The results of a 3-D seismic survey, to be available in the fourth quarter, as well as of the next two wells, will help narrow the range, he said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net