Chevron says Comalco study boosts PNG pipe
BRISBANE, April 3 (Reuters) - Chevron Corp said the planned A$3.5 billion Papua New Guinea to Brisbane gas pipeline would be given extra momentum following the selection of Gladstone as the likely site for Comalco Ltd's (Australia:CMC.AX - news) A$1.4 billion alumina refinery.
``The announcement increases certainty of gas sales volumes and clearly adds to overall levels available to us,' PNG gas project leader and Chevron executive John Powell told Reuters.
``It will strengthen the commercial fabric of the project, there is no doubt.'
Chevron has said it needs commitments from customers to take 140 petajoules a year of gas to make the pipeline viable. Powell declined to say how much Comalco would take, but said the pipeline still needed more customers.
``We'll need a customer base in all three centres of Townsville, Gladstone and Brisbane,' he said.
``Obviously this (Comalco refinery) goes a long way to meeting the Gladstone load requirement.'
He said the Comalco decision to conduct a final feasibility study on building the refinery in the Queensland coastal city of Gladstone would be a catalyst to finalise gas reserve integration issues, including the integration of 47.5 percent gas owned by oil major Exxon Corp (NYSE:XOM - news) in the Hides field and also fiscal arrangements with the PNG government.
Powell said the announcement would also lead to the early release of the Queensland government's outline for future energy requirements, the Cleaner Energy Strategy, which is believed to include a significant gas element.
biz.yahoo.com
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Comalco Chooses Queensland for A$1.4 Bln Refinery (Update2)
By Karen Peebles
(Adds company comment from eighth paragraph; comments from
Oil Search managing director at seventh paragraph.)
Brisbane, Australia, April 3 (Bloomberg) -- Comalco Ltd.,
Australia's largest aluminum producer, said it will study
developing a proposed A$1.4 billion ($850 million) alumina
refinery in Queensland state instead of Malaysia.
Brisbane-based Comalco has been looking for the past three
years at what would be the first new alumina refinery built in
the world in 20 years. It chose Australia ahead of Bintulu in
Sarawak province, Malaysia, because of incentives from the
Queensland state government and the Federal government, such as
financial help with the plant's infrastructure.
Today's announcement pins down a likely site, though it
still doesn't guarantee a new refinery will be built in the near
term.
``There would have been more excitement if they had chosen
Malaysia. I think most were expecting Gladstone (in Queensland)
was most likely,' said Tim Barker, who helps manage A$4.75
billion in Australian equities at Rothschild Australia Investment
Management.
If the plant does go ahead at the right time, it will
probably become a major customer for a proposed US$3.5 billion
plan to pipe natural gas 2,500 kilometers from Papua New Guinea
to Australia's Queensland coast.
Should Comalco source its gas requirements for the new plant
from the pipeline it is possible it would use about 27 petajoules
of gas a year -- or one-eighth of the total demand the pipeline's
backers say they are close to signing up. A decision on whether
the pipeline is going ahead won't be made at least until
September.
Future Hurdles
``This clears up any ambiguity about sites, but there are a
few hurdles to go,' said Peter Botten, managing director of Oil
Search Ltd., one of the partners planning to build the pipeline.
``This is a positive step in the right direction.'
The company said it is still looking at options for power
sources, though ``it would be a likely purchaser of gas from the
pipeline,' said Comalco spokesman Geoffrey Ewing.
In January, Comalco said the earliest that construction
could start would be the fourth quarter of this year, and the
plant will take about 30 months to build.
Rothschild's Barker said, if the Gladstone project doesn't
shape up economically after the feasibility study, Comalco may
just expand the existing Queensland Alumina refinery at Gladstone
in which it has a 30.3 percent interest.
An expansion instead of a new plant is ``something we have
and are looking at but it doesn't impact on' this project, said
Ewing.
Rio Tinto
Comalco is the subject of a A$1.47 billion bid by Rio Tinto
Ltd. for the shares in Comalco that Rio doesn't already own. The
proposed refinery has the potential to become an issue for
shareholders holding out from accepting the Rio bid.
Barker said details about the proposed new alumina refinery
plant are expected to be included in takeover documents relating
to the bid. He said shareholders may hold out against the Rio bid
if they believe Rio hasn't given fair value for the proposed
project.
The company said in a statement that detailed studies will
continue over the next few months and ``depending on the outcome
of the feasibility study, the Comalco board will be asked to
consider the project.'
Comalco shares rose 2 cents or 0.2 percent, to A$9.40.
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