By JAMES PATON
ADELAIDE (Bloomberg) -- ConocoPhillips and
Santos, developing separate liquefied natural gas projects in
Australia at a cost of more than $40 billion, agreed to share
pipelines and exchange gas to curb costs and reduce
The projects in Queensland state will build two pipeline
connection points, according to a joint statement from Santos
and ConocoPhillipss partner, Origin Energy. Santos and
Origin said theyre looking at opportunities for further
ConocoPhillips and Origin are building a $24 billion project
to liquefy natural gas for shipment to Asia, while Santos is
developing an $18.5 billion development. BG Group is building
another coal seam gas-to-LNG project in Queensland. Australia,
forecast to become the worlds largest supplier of LNG
with seven projects under construction, is facing rising costs
that threaten the industrys expansion.
The CSG-LNG sector failed to capture the synergies of
large-scale consolidation earlier in the planning phase and as
a result the industry is being developed in an inefficient
way, Mark Wiseman and Anthony Ta, analysts at Goldman
Sachs Group, said in a note. Players are increasingly
looking at areas where they can reduce project operational risk
and capture cost savings.
Without the agreement, the projects would need 140 km of
additional pipelines and multiple connection points to send
their gas to plants on Curtis Island for processing for export,
according to the statement.
It heralds the beginning of future value-adding
collaboration and cooperation between the various
projects, Trevor Brown, the Queensland VP for Santos,
said on a call with reporters.
Both the Australia Pacific LNG project, led by ConocoPhillips and
Origin, and the Gladstone LNG venture, operated by Santos, are
due to begin exports in 2015. Arrow Energy, owned by Royal
Dutch Shell and PetroChina, is considering a fourth
Santos and BGs Australian unit, QGC Pty, reached an
agreement in July to link pipelines on the Queensland mainland
and on Curtis Island, where the plants that process coal-seam
gas into LNG are based. Connecting the pipelines will allow the
developments to buy, sell and swap gas at those points.