Conoco Divests Sunrise Stake to Timor-Leste
ConocoPhillips has agreed to sell its 30% interest in the Greater Sunrise project to the Timor-Leste government in a transaction expected to close in 1Q 2019, it said October 1.
The price is US$350mn which is to be used for general corporate purposes, said ConocoPhillips, adding that the deal requires funding approval from the Timor-Leste council of ministers and national parliament, plus regulatory approvals and partner pre-emption rights. The Australian Financial Review said the deal was agreed September 28; the newspaper broke the story two days later.
Oil firms and the Australian government have often called for the Sunrise gas assets to be developed using either a floating offshore LNG plant or one onshore Australia. A treaty was signed in March 2018 whereby different profit shares would be allocated, depending on how the gas assets are developed. But in August, the TL government again reiterated its desire for a tie-back to Timor-Leste, considered a very expensive option that would mostly benefit the host government through tax and labour requirements. That determination may have prompted Conoco to decide to divest its stake.
Australia's Woodside operates Greater Sunrise with a 33.44% interest, while ConocoPhillips has 30%, Shell 26.56% and Japan's Osaka Gas 10%. The fields ,150 km southeast offshore Timor Leste and 450 km northwest of Darwin in Australia, were discovered in 1974 and hold gross contingent resources of 5.13 trillion ft3 of gas and 225.9mn barrels of condensate.
Consultancy Wood Mackenzie analyst David Low remarked: “We believe the likely forward plan to monetise Sunrise is now through an onshore LNG development in Timor-Leste requiring: construction of a new liquefaction plant and associated infrastructure; a FPSO [floating production ship] to process and handle the condensate; a new pipeline connecting the FPSO to shore.” He said TL authorities are determined to harness the economic benefits of an onshore project, and would do so to replace declining revenues from the mature Bayu Undan field.
Bayu-Undan, a joint Australia-TL gas field, feeds the ConocoPhilips-operated Darwin LNG plant onshore northern Australia. In mid-2018 ConocoPhillips awarded contracts for the development of the Barossa gas-condensate field offshore Australia, which it said would backfill Darwin LNG for 20+ years, effectively signalling that Sunrise was no longer vital to extending Darwin's life.
“We are pleased to reach an agreement mutually beneficial to the government of Timor-Leste and ConocoPhillips,” said Matt Fox, the US major's executive vice president for strategy, exploration and technology.
“Although we differ with the government on its proposed development plan for Sunrise, we recognise the importance of the field to the nation of Timor-Leste, and the sale of our interest to the government gives them a working interest in this important development,” he added.
Timor-Leste joined the UN as a fully independent country in 2002, three years after newly democratic Indonesia finally relinquished its control over the former Portuguese territory. In the years before, Indonesia's military government fought an often brutal war against the island territory. (Banner photo credit: Timor-Leste government)