ConocoPhillips will consider diverting natural gas from fields in northern Australia along a proposed transcontinental pipeline that would link directly to markets in the southeast, a senior executive told Reuters on Thursday.
The U.S. oil major is also leaning towards developing the Barossa gas field offshore northern Australia, with a final decision due in early 2019, Kayleen Ewin, the company's vice president for sustainability, communications and external affairs, said in an interview.
Ewin said the proposed transcontinental pipe would open Australia's domestic market for northern producers. The system would carry natural gas from the Northern Territory to Moomba in South Australia, the hub for gas to the country's main southeastern markets. Australia's government said last month it would study and possibly contribute to building the pipeline.
That offers another opportunity for developing gas resources in a region where Royal Dutch Shell (RYDAF)
, Malaysia's Petronas, Italy's ENI SpA (E)
, and Australia's Santos and Origin Energy (OGFGF.PK)
have undeveloped interests.
"Really our only route to market at the moment is LNG (liquefied natural gas) for northern Australia gas, and we always welcome anything that opens up another route to market," Ewin said.
"We'd definitely look into it ... southeast Australia for LNG has historically been and will be in future a big market for us. Proximity to market just means there is a cost advantage in terms of competing."
A looming gas shortage for Australia's populous east has seen prices spike and the government search for solutions, including calling a crisis meeting this week with producers, some of whom have drawn gas from the domestic market to meet export contracts.
Another pipeline linking central Australia with the east is delayed.
ConocoPhillips announced on Wednesday it is also considering adding a second production unit, or train, at its Darwin LNG plant and possibly processing gas from rivals' undeveloped fields.
ConocoPhilips is also in the final stages of picking a new gas field to fill the plant's existing train, when supply from its current gas source, the Bayu-Undan field, runs out around 2022.
"Barossa looks to be the lowest cost development," Ewin said, adding its proximity and the ease of extraction means the company is leaning toward preferring it over the larger Poseidon field.
The project is expected to cost up to A$10 billion ($7.5 billion).
The company had said in February a final decision was due late in 2018 at the earliest.
($1 = 1.3307 Australian dollars) (Reporting by Tom Westbrook