Apache plans expansion of Australian gas projects, eyes Wheatstone LNG


PERTH -- Apache will push ahead with a big build up in its Australia gas and oil operations over the next three years, with this involving heavy spending in Western Australia in 2013 and 2014, coinciding with the United States company's decision to sell $4 billion of its assets to shore up its balance sheet.

Its expansion plans come at a time when Australia's natural gas sector is struggling with cost overruns and facing the threat of LNG exports from shale gas rich North America targeted at core Asian markets, as well as potential competition from recently discovered and massive offshore East Africa reserves.

The company will spend a record $1.9 billion in Western Australia state where its Australian operations are sited this calendar year, and a similar or slightly increased amount next year as it rolls out new projects, Apache's new Australian chief said.

Next year's spending would likely be between $1.8 billion and $2.1 billion, although final amounts hadn't been decided, Faron Thibodeaux, Australian MD of Apache, told The Wall Street Journal.

In July, Apache inked an agreement to sell shallow water operations in the Gulf of Mexico for $3.75 billion. Alongside a long established domestic gas infrastructure in Western Australia, Apache is a minority partner in Chevron $29 billion Wheatstone gas export project.

Last month Apache unveiled its Bianchi gas discovery off Western Australia and said it is assessing potential commercial opportunities for the find, along with the nearby Zola field, where it struck gas in 2011.

Mr. Thibodeaux said that Wheatstone is one development opportunity being looked at for Bianchi and Zola, alongside the company's domestic gas facilities. We have the luxury of having options, he said, adding it is too early to estimate the size of the Bianchi reserves. "Where it ends up will purely be what makes the most commercial sense, as well as being able to deliver into either one of those two markets, said Mr. Thibodeaux, who took over from Tom Maher as head of Australia" operations in January.

Both Bianchi and Zola are in Retention Lease WA-49-R, where Apache is operator and majority owner, and has Santos, OMV Australia, JX Nippon and Tap Oil as partners.

The permit lies relatively close to a trunkline being built to connect onshore gas fields to the first stage of Wheatstone's land based processing facility, which is due to ship its first LNG in late 2016.

Apache is also a partner in the BHP Billiton operated Macedon project, due to produce first gas late in the Q3, and operator of two new oil projects, Balnaves and Coniston, due for completion in 2014.

First oil from the $438 million Balnaves venture should be delivered by the start of the Q2 next year, Mr. Thibodeaux said.

The $526 million Coniston development, meanwhile, is expected to start up in mid 2014 after the company refurbishes the Ningaloo Vision floating production storage and offloading vessel to handle production from the field, he added.

The two projects forecast to produce more than 50,000 bpd in total remain on budget and schedule, despite cost pressures in Western Australia, Mr. Thibodeaux said. "They are doing very well but it doesn't come easy," he said.

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