The liquefied natural gas industry can expect a ten-year global investment high of $26 billion per year by 2015, according to a report by energy business advisors Douglas-Westwood.

The World LNG Market Report 2011-2015 also predicts world spend to recover momentum, and capex on LNG facilities for the 2011-2015 period is expected to total over $93 billion.

Pacific basin countries will be the main contributor to the forecasted boom, the report says.

China, in particular, has seen its LNG demand grow from 1 billion cubic meters in 2006 to around 13 billion cubic meters today, the report says. On the supply side, despite the global economic recession, 2010 saw the start of major construction work on new LNG facilities in Australia and Papua New Guinea.

In addition, there is the prospect of further demand for natural gas as the world considers the future of nuclear energy in the aftermath of the Japanese crisis, according to the report.

LNG imports to Western European and Latin American countries have also increased, the report says.

AMERICAS

U.S.

Pivotal LNG to Buy 60,000 gpd Alabama Facility

Pivotal LNG, a subsidiary of AGL Resources Inc., has signed an agreement with the Utilities Board of the City of Trussville, for the purchase of an approximately 60,000 gallon per day liquefied natural gas facility located in Trussville, Alabama.

As a part of AGL Resources' growth strategy, Pivotal LNG has embarked on a new business venture selling liquefied natural gas in the wholesale market to buyers who then deliver the LNG to end-users such as trucking fleet operators. This value chain will provide end-users with a lower cost, environmentally clean and abundant American fuel as a substitute for diesel.

"This is an exciting time in the natural gas industry," said John W. Somerhalder II, AGL Resources' Chairman, President and Chief Executive Officer. "We are seeing a trend toward more companies interested in fueling trucks, fleet or heavy duty vehicles, and other large horsepower engines with natural gas. The addition of the Trussville LNG facility aligns with the needs of our new wholesale business venture under Pivotal LNG." Natural gas when cooled to the point of becoming a liquid is much easier to transport for use where piped natural gas is impractical or unavailable. Heavy duty trucking, remote power generation, marine engines and railroad locomotives are just a few examples where this fuel can serve as a less expensive and environmentally friendly alternative fuel to diesel.

"Pivotal LNG's new business initiative complements AGL Resources' existing businesses," said David Schultz, Vice President, Pivotal LNG. "Our company is another key component of AGL Resources' strategy to expand the use of natural gas in the alternative fuel market through the use of affordable, clean-burning, abundant and domestic natural gas."

AGL Resources has been in the business of operating utility LNG facilities for over 30 years.

Pivotal LNG, a wholly owned subsidiary of AGL Resources, sells liquefied natural gas as a substitute fuel for transportation and other mechanical uses in the wholesale LNG market.

Golden Valley Electric, Flint Hills Sign MoU for North Slope LNG Facility

Golden Valley Electric Association and Flint Hills Resources Alaska have commenced engineering on a natural gas liquefaction facility on Alaska's North Slope. The two companies have signed a memorandum of understanding to exclusively negotiate agreements to construct and operate a facility that would enable liquefied natural gas to be trucked to the Interior by first quarter 2014.

GVEA would use the gas to power its newest turbine at the North Pole Power Plant. Flint Hills would use the gas as a supply fuel for the refining process at its North Pole refinery.

The deal would deliver gas "at cost" to each company. Lower costs mean lower rates to GVEA members. Flint Hills would become more competitive and efficient by burning LNG instead of refined crude oil in its refinery.

"We are excited about this bridging project," said Brian Newton, president and CEO of GVEA. "GVEA and Flint Hills are customers of each other and this is a continuation of our ongoing relationship. Flint Hills brings the expertise and financial strength to work with us to make this project a reality.

"While GVEA supports a gas pipeline to Fairbanks, trucking LNG would lessen our dependence on high-priced oil thereby bringing energy cost relief sooner than other proposed projects."

"We work closely and well with GVEA," said Mike Brose, Flint Hills vice president and plant manager. "This project would partially eliminate the competitive disadvantage for our refinery due to high energy costs, and provide an environmental benefit to Fairbanks and Interior Alaska. We are also excited about additional opportunities such as propane production and LNG diesel production to provide more competitive clean fuel for Alaska's trucking and transportation industry."

Engineering for the project is underway. The objective is to have LNG available in North Pole by the first quarter of 2014. LNG could also be made available to other users and distributors of LNG in Fairbanks and Interior Alaska.

Golden Valley Electric Association is a member-owned cooperative which owns and operates five power plants that provide power to nearly 100,000 Interior residents. GVEA is planning to construct the largest wind farm in the Railbelt. Its Eva Creek Wind project is anticipated to be online September 2012. At 24-megawatts, Eva Creek will meet the board's renewable energy pledge of having 20 percent of the system's peak load generated by renewable resources by 2014.

Federal Regulators Say $200 Mln Budgeted to Begin Environmental Review for Lower 48 LNG Pipeline

The Federal Energy Regulatory Commission (FERC) has put producers and land owners on notice that it is preparing to study the potential environmental impact of a natural gas pipeline to the Lower 48.

“Liken it to building a house. You need a building permit,” says Larry Persily, Alaska’s Federal Pipeline Coordinator.

And while you also need the financing, Persily says it won’t do you any good if you don’t have the building permits.

“It’s a benchmark. We are now starting the next stage of this,” said Persily.

To prepare for this next stage, Persily says TransCanada and its partner, Exxon Mobile Corp., have budgeted about $200 million in field studies this year.

“People should be excited, or at least hopeful, that they’re spending $200 million this year,” says Persily. “That part of the deal, the building permit, if you will, is proceeding on schedule -- and it’s a serious effort.”

But supporters of a liquefied natural gas line from the North Slope to Valdez say they’re troubled by what they found in the August 6th edition of the Federal Register. In FERC’s announcement, there’s a small footnote that says the environmental review won’t include the LNG route, because it does not have enough information to proceed.

“My take on it, is, that TransCanada has no interest in a line to Valdez,” says Bill Walker, a former candidate for governor. Currently, Walker is general counsel for the Alaska Gasline Port Authority.

“It’s no surprise from what I’ve seen from FERC at all. It’s further acknowledgement that we are left in the dust, when it comes to the energy race.”

Walker and other proponents of the LNG line to Valdez say TransCanada and Exxon have their own agendas. Walker says it’s in TransCanada’s interest to bring the gas to its system in Canada, while Exxon is busy developing projects all over the world and the Alaska gas is not a priority.

“Why would they look at a line into Valdez, when in fact they don’t have to…we’ll continue to pay them under AGIA,” said Walker.

Under the Alaska Gasline Inducement Act, TransCanada and Exxon can get reimbursed by the state for up to a half a billion dollars in expenses.

Persily says the producers will probably recover about 160 million from the state for their expenditures this year. Even so, he says the outstanding balance says a lot about their commitment to the project.

“If you have no expectations of this project happening, you would never spend 40 or 50 million dollars for show,” says Persily. “You’d go spend it elsewhere.”

Persily also says TransCanada has likely not had any bidders in the LNG line.

"The customers determine where it gets built, and obviously there weren't enough customers out there willing to commit their balance sheet, their assets, their checkbooks for an LNG line."

Persily’s considers FERC’s announcement on August 5 a milestone of sorts.

“We’ve never gotten this close before,” says Persily. “The Federal Energy Regulatory Commission, for the first time, it’s saying, ‘Here’s the notice. Here’s the calendar.'”

To meet FERC’s timetable, TransCanada and its partner, Exxon Mobile, will have to submit eleven detailed studies by December, reporting on resources that might be affected by the pipeline -- from the soil and water to the socio-economic consequences.

In January of 2012, the FERC is scheduled to begin hearings in Alaska and Washington, D.C., to explore the potential environmental hurdles to permitting the pipeline.

February 27, 2012 is the deadline for public comment.

In October of next year, the two producers must submit their application to the FERC for a certificate required for pipeline construction.

But Persily says, none of this guarantees a pipeline.

TransCanada has yet to announce whether it’s succeeded in recruiting customers for the new line, a key step to getting loans for the project, estimated to cost up to 40 billion dollars.

Then there are the state’s tax terms, which producers have said are too high. And there's sure to be a protracted wrestling match anticipated, should the legislature and the governor tackle revamping oil and gas taxes.

“Am I optimistic that this is going to get built?” said Persily. “Has something transcendentally been changed in the last two weeks. No.”

Flint Hills, Golden Valley Electric Plan Liquefaction Plant at Prudhoe Bay for Initial Cost of $180 Mln

Flint Hills Resources and Golden Valley Electric Association (GVEA) of Fairbanks have begun engineering on a natural gas liquefaction plant at Prudhoe Bay on the North Slope and plan to build the facility in time for deliveries in 2014, Flint Hills and GVEA announced.

The project would involve trucking of LNG from the North Slope to Fairbanks on the Dalton Highway. Flint Hills, a Koch Industries subsidiary, operates a refinery at North Pole, near Fairbanks. Golden Valley is the regional electric cooperative for Interior Alaska.

The venture is not connected, at this time, with a similar LNG project being pursued by Fairbanks Natural Gas LLC, a small private gas utility operating in Fairbanks. FNG has site preparation under way for its proposed plant but said it needs contracts with large customers like Flint Hills and GVEA for its project to proceed.

GVEA spokeswoman Corinne Bradish said a decision was made to proceed in a partnership with Flint Hills and not the local gas utility, at least at this time, because the two-party deal would result in lower costs of LNG delivered to Fairbanks.

"Several years ago GVEA announced that it was considering a deal with Fairbanks Natural Gas. However, we ultimately decided to pursue a partnership with Flint Hills because it delivers gas at cost. The expense of liquefying, trucking and regasification operations would be shared and neither party would profit from these activities. That means lower costs to our customers," Bradish said.

Meanwhile, the LNG proposal will require approvals by the Regulatory Commission of Alaska, which will have to approve Golden Valley's passing its share of costs for engineering and building the LNG plant at Prudhoe Bay and a regasification plant near Fairbanks on to Interior Alaska ratepayers.

The cost is estimated at $180 million but that will be refined as engineering continues. Fairbanks Natural Gas LLC, the small gas utility that now serves Fairbanks with LNG trucked from south central Alaska, is studying a similar North Slope LNG trucking plan and has estimated costs at $160 million.

The two companies said they have secured a gas supply contract with a North Slope producer but declined to identify the company. For its project, Fairbanks Natural Gas has a contract with Exxon Mobil Corp., one of three major North Slope producers.

Flint Hills and Golden Valley did not release cost estimates for the project. Fairbanks Natural Gas has estimated that its project, which would be similar, would cost about $160 million for the LNG plant on the North Slope and the regasification plant near Fairbanks.

Meanwhile, Fairbanks Natural Gas has work underway this summer to expand a six-acre pad at Deadhorse, the industry service area adjacent to Prudhoe Bay. The company has also a right-of-way application filed with the state Department of Natural Resources for a 3.8-mile, eight-inch pipeline from Flow Station 1 in the Prudhoe Bay field to the site of the LNG plant.

While FNG is not a part of the joint Flint Hills-Golden Valley deal now, that could change, said Brian Newton, Golden Valley's president. FNG has assets that could be contributed, such as its pad and lease at Deadhorse and the pending pipeline right-of-way, as well as engineering and planning it has done to date.

Newton said the nature of the Flint Hills-Golden Valley venture has yet to be defined. Engineering work being done now is with resources internal to both partners, (Flint Hills has experience with LNG elsewhere) Newton said, but a third-party engineering contractor will be retained soon.

At that time a cost-sharing arrangement will have to be worked out. A key part of the current deal, according to the press release from the two parties, is the concept of, "at cost," gas delivered to both, meaning no profit. Under this arrangement Golden Valley would contribute its share of capital and would share operating costs. Fairbanks Natural Gas now serves about 1,100 commercial and residential customers in Fairbanks and trucks LNG about 400 miles from a small liquefaction plant in south central Alaska, in the Matansuka-Susitna Borough north of Anchorage, its president Dan Britton said.

The company has operated since 1998 and now purchases gas from Aurora Gas LLC, an independent Cook Inlet gas producer. On average FNG ships about three truckloads per day of LNG to Fairbanks, but this varies from one to two truckloads daily in summer and four to five truckloads daily in winter, Britton said.

Currently, the constraints in gas supply from Cook Inlet limits the ability of the Fairbanks utility to take on new customers and prompted the company to pursue trucking LNG from the North Slope, Britton said.

Oil is also used widely for heating parts of Fairbanks not now served by Fairbanks Natural Gas, and the cost of home heating has become a serious economic problem for the community, Fairbanks North Star Borough Mayor Luke Hopkins said. Also, the inability of FNG to expand service has caused delays in new retail expansion in Fairbanks because large out-of-state firms planning new stores prefer not to use oil for space heating because of the expense and liabilities associated with construction of underground fuel storage.

El Paso Corp Inaugurates $3.5 Bln 680 Mile Wyoming to Oregon Natural Gas Pipeline

El Paso Corp. has inaugurated its newest pipeline, which at 680-miles and 42-inches in diameter is built to carry vast quantities of Rockies natural gas from the Opal hub in Wyoming to Malin, on Oregon's border with California.

The $3.5 billion project, which started shipments in late July, opens at a time when demand growth and prices have collapsed from the high levels when it was conceived. In the short term at least, that's likely to keep gas shipments well below the pipe's capacity of 1.5 billion cubic feet of gas per day, and cut profits accordingly.

Company officials stress it's a long-term investment. Moreover, ship or pay contracts in place cover more than 70 percent of the pipe's capacity, so the company gets paid regardless.

"Ruby is the right pipeline at the right time," said El Paso spokesman Richard Wheatley. "Competing pipeline proposals did not move forward... If you research the natural gas resource base for the Rockies, it is huge. The additional capacity is definitely needed now and in the future."

Indeed, of more than a half dozen natural gas infrastructure projects proposed for the region three years ago -- each deemed a pressing necessity at the time -- Ruby is the only one that has taken concrete form.

Though the pipe terminates in Oregon, the gas -- for now -- is aimed at consumers in California, including the San Francisco-based utility giant Pacific Gas & Electric.

However, Ruby could still have implications for a Northwest gas supply. Experts say it gives the region more access to a gas basin since demand is likely to grow.

In the short run, Ruby emphasizes a market-based notion that there is no need for terminals in Oregon to import liquefied natural gas. The rationale for those projects relied largely on demand in California -- needs now served by Ruby and the existing TransCanda GTN pipeline that runs through central Oregon.

But the Ruby Pipeline gives weight to the idea to convert LNG import projects to export facilities to serve lucrative gas markets in Asia. Backers of the proposed LNG terminal in Coos Bay and its associated pipeline, which also terminates in Malin, are discussing that notion with U.S. producers and Asian buyers to determine how serious their interest is.

"There is currently no need for import into North America," said Bob Braddock, manager of the Jordan Cove LNG project in Coos Bay. "We accept that.

If anything makes sense, “It's export." Braddock said the company plans to finish its licensing for an import facility because most of the money necessary has already been expended. Converting that application to a dual-use facility would involve minimal work, he said, because most of the main structures are the same.

An export terminal and pipeline to the coast from Malin could cost $3.5 billion. Any company that takes a capacity contract would be making a long-term commitment, so a decision may depend on what happens with proposals to build a similar facility in Kitimat, British Columbia, close to shale gas fields being developed inland.

"If people have interest in our facility, it's because they believe there's a need for more than one," Braddock said.

Officials at El Paso say Ruby has sufficient capacity to supply such a facility.

Many believe an Oregon LNG export terminal is still a long shot, but hardly out of the question, according to Ken Zimmerman, a gas market analyst with the Oregon Public Utility Commission.

"There's way too much money to be made exporting gas to Asia to write those projects off," he said. "I wouldn't be surprised to see a couple more developers come along and say they want to build export terminals."

Keith White, head of gas supply for Oregon's largest gas utility, Northwest Natural Gas Co., says Ruby will have little immediate impact on his company's customers. The Rockies gas could displace shipments from Canada to California and put a damper on prices at gas hubs in Canada. That could reduce the premium that Oregon consumers typically pay for their supply, three quarters of which comes from Canada.

The new Rockies supply at Malin could also eventually flow north on the existing interstate pipeline through Central Oregon. But, that only benefits Northwest Natural if it can solicit sufficient demand and secure regulatory approval for the cross Cascades pipeline it wants to build from Central Oregon into the Willamette Valley. The company backed off its proposal to build a pipe south of Mt. Hood when its anchor customer for the project -- another proposed LNG terminal -- filed for bankruptcy. Yet the utility is still set on building the pipe eventually, and the Rockies supply from Ruby could bolster its argument that the line would provide supply diversity for customers.

Coupled with an economic recovery or demand from new gas fired power plants expected to be built, that could finally push the cross-Cascades Palomar pipeline from Northwest Natural's wish list to a commercially viable project.

CANADA

Progress Energy, Petronas to Develop BC LNG Export Facility

Progress Energy Resources Corp. announced August 2 that it has closed the previously announced transaction to create a strategic partnership with the Malaysian national oil and gas company, PETRONAS, to develop a portion of Progress' Montney shale assets in the Foothills of northeast British Columbia (the "Transaction"). Under the Transaction, PETRONAS acquired 50 percent of Progress' working interest in the Altares, Lily and Kahta properties (the "North Montney Joint Venture").

"Both parties have worked diligently and cooperatively towards the completion of the agreements that form the basis of our strategic partnership," said Michael Culbert, President and Chief Executive Officer of Progress. "We will now move forward on building a strong gas production growth profile from the North Montney Joint Venture assets as well as initiating the feasibility study for the development of an LNG export facility on the west coast of British Columbia."

PETRONAS is paying a total consideration of CDN$1.07 billion of which 25 percent of the total consideration (CDN$267.5 million) has been paid in cash upon closing and 75 percent of the total consideration will be paid in the form of a capital funding commitment whereby PETRONAS will pay 75 percent of Progress' share of future capital expenditures in the North Montney Joint Venture to a total of CDN$802.5 million.

PETRONAS and Progress have also established an LNG export joint venture (the "LNG Export Joint Venture") which is 80 percent and 20 percent owned, respectively. The LNG Export Joint Venture will launch a feasibility study immediately to evaluate the potential of the LNG export facility on the west coast of British Columbia. PETRONAS will be leading the development of the LNG export facility, and PETRONAS and Progress will jointly market the LNG utilizing PETRONAS' well-established and extensive network of customers in LNG markets globally.

In connection with the LNG Export Joint Venture, at the time of a successful LNG Export investment decision, PETRONAS will provide a standby equity financing commitment of up to $600 million, for Progress' capital requirements of the North Montney Joint Venture to supply gas for the LNG Export Joint Venture, subject to receipt of all regulatory approvals.

PETRONAS, ranked among the most profitable among the Fortune Global 500 entities is engaged in the oil, gas and petrochemicals industries with strategic business assets and interests in more than 30 countries. It is one of the world's leading LNG companies and is fully involved in every value chain of the LNG business, from natural gas production, liquefaction and shipping to re-gasification and trading. Apart from its Malaysian production facility, currently one of the world's largest, PETRONAS also owns interests in LNG assets in Australia, Egypt and the United Kingdom.

ASIA

AUSTRALIA

Clough DORIS JV Secures LOI Ichthys LNG Project

Engineering and construction company Clough Limited on August 9 announced the receipt of a Letter of Intent for a contract valued in excess of A$250 million to the Clough DORIS Joint Venture (CDJV) for the provision of Offshore Integrated Project Management Support Services (IPMS) for the Ichthys LNG Project.

CDJV is a 50:50% joint venture between Clough and French offshore engineering specialists, DORIS Engineering.

The commencement of work is subject to execution of a binding contract and a Final Investment Decision (FID) for the Ichthys LNG Project by the joint venture participants, INPEX and Total. It includes overseeing, in an integrated team with INPEX, the detailed engineering design, procurement, fabrication, at-shore commissioning, tow to site, and offshore hook-up of the Central Processing Facility (CPF) and floating production, storage and offloading vessel (FPSO) for the project.

Under this Letter of Intent, pre-FID expenditure is limited for CDJV to the commencement of activities required to mobilize a technical team of engineers to support the Ichthys Project. It is anticipated that this team will grow to approximately 300 personnel during the fabrication phase of the project. Full mobilization is due to commence immediately following FID for the Ichthys Project scheduled for Q4 2011.

"Clough is delighted to be chosen by the Ichthys Joint Venture to provide IPMS services to this world class offshore facility. We will utilize Clough's proven project management systems and the complementary strengths of both Clough and DORIS to deliver on the technical, project management and resourcing challenges associated with this landmark Australian LNG project," said Clough CEO John Smith.

"The DORIS Engineering Group is proud to be associated with Clough to execute this IPMS contract on behalf of the Ichthys Joint Venture, for a very challenging project. Our vast experience in deepwater floating structures and gas treatment facilities will be extensively used throughout this contract," said Chairman and CEO of DORIS Engineering, Loic des Deserts.

The Ichthys LNG Project is a Joint Venture between INPEX (76%, the Operator) and Total (24%). Gas from the Ichthys Field, in the Browse Basin approximately 200 kilometers offshore of Western Australia, will undergo preliminary processing offshore to remove water and extract condensate. The gas will then be exported to onshore processing facilities in Darwin via an 885km subsea pipeline. The Ichthys Project is expected to produce 8.4 million tonnes of LNG and 1.6 million tonnes of LPG per annum, along with 100,000 barrels of condensate per day at peak.

Sinopec Pays $1.765 Bln for 15 Percent Stake in Australia Pacific LNG Project

Chinese state-controlled oil giant Sinopec has completed its acquisition of a 15% stake in the Australia Pacific LNG joint venture owned by Origin Energy and ConocoPhillips, APLNG said August 9.

The completion of the deal means all the conditions precedent have now been met for the sale of 4.3 million mt/year of LNG from the project to Sinopec, starting in 2015. The sales contract runs for 20 years.

APLNG sanctioned the first stage of development for its $20 billion coalseam gas-based LNG project on Curtis Island in the eastern Australian state of Queensland on July 28. APLNG's project will initially involve the $14 billion development of a first 4.5 million mt/year LNG production train and infrastructure to support the second train.

The company plans to sanction the second train once it finalizes discussions with potential customers. The second train is expected to start up in early 2016.

Sinopec has paid $1.765 billion for its stake in APLNG, with the shares held by Origin and ConocoPhillips now diluted to 42.5% each. Sinopec's investment provides a net reduction in the two founding partners' funding requirements of $750 million, APLNG said.

UNESCO Concerned about Curtis Island LNG Threat to Great Barrier Reef

The United Nation's environmental arm has admonished the Queensland and Australian governments for allowing liquefied natural gas processing on the doorstep of the Great Barrier Reef.

At a meeting last month, UNESCO's World Heritage Committee expressed "extreme concern" at the Queensland and Australian Labor government's backing of planned multi-billion-dollar LNG processing facilities at Curtis Island, near Gladstone.

In the notes from that meeting the organization criticized the federal government's failure to alert it, in line with World Heritage guidelines that the projects would go ahead.

It suggested the project could affect the "Overall Universal Value" of the Great Barrier Reef and called for a comprehensive strategic assessment of the reef, including a long-term plan for sustainable development.

UNESCO also requested an international monitoring mission be allowed to visit the reef to scrutinize conservation efforts.

Queensland Premier Anna Bligh said her government wasn't embarrassed by the international criticism and was confident appropriate environmental protections were in place.

"We are very confident in the rigorous nature of the environmental assessments. I think UNESCO might not understand how seriously Australia takes its obligations," she told AAP.

She said while it was the federal government's responsibility to liaise with UNESCO about World Heritage matters, the state's approvals of LNG projects were not kept secret from the organization.

"There is no secret about this; the whole world knows about it, we've been putting out regular public announcements about this.

Three multi-billion-dollar LNG projects are currently planned for the Gladstone area, requiring dredging around Curtis Island and a dramatic increase in shipping traffic at the local port.

Environmentalists have expressed concern about the impact the projects will have on the reef and a number of endangered species, especially the dredging works.

The Great Barrier Reef was declared a World Heritage Area in 1981.

WWF spokesman Richard Leck said the rebuke from UNESCO was a major cause for concern.

"I've been working on reef issues for ten years or so, and I've never seen a similar development," he told AAP.

"It's not like they are going to overturn the World Heritage status, but it is a concern that we hold the Great Barrier Reef up as a shining light and a world body is expressing concern that perhaps we're not managing it as well as we should be."

Queensland Greens Senator Larissa Waters said the state government should be embarrassed for treating the Great Barrier Reef as "a gas and coal highway".

"I'm embarrassed that our government treats the reef simply as a vessel to export more fossil fuels out of," she told AAP.

"And I think the state government should be embarrassed at the very poor protection that it provides the Great Barrier Reef and the federal government needs to do a better job.

"The federal government needs to put the reef ahead of mining profits and do its job to protect this $6 billion dollar tourism icon."

She called on Mr Burke to meet with UNESCO urgently to discuss the environmental body's concerns.

"The federal government shouldn't be approving any more developments that might affect the Great Barrier Reef until they've done a comprehensive strategic assessment as UNESCO calls for," she said.

Comment has been sought from Federal Environment Minister Tony Burke.

ConocoPhillips Warns on $20 Bln Australia Pacific LNG Project Costs, Strong Aussie Dollar

Australia's burgeoning liquefied natural gas sector faces a "struggle" in the near term because of rising cost pressures and the impact of a strong Australian dollar, U.S. energy group ConocoPhillips said August 2.

Despite this, ConocoPhillips remains confident of approving by the end of the year the second phase of its US$20 billion Australia Pacific LNG project in Queensland with partner Origin Energy Ltd., said Todd Creeger, Conoco's Australia President.

It is also eyeing a potential LNG development for its Browse gas assets offshore Western Australia should a near-US$500 million drilling program, due to begin later this year, be successful, Creeger said at a business function.

ConocoPhillips expects to double its local workforce of more than 550 over the next few years, but it is wary of costs pressures that have hit other projects, Creeger said, adding that exchange rates are an added burden as revenues from Australian LNG projects generally are priced in U.S. dollars.

"U.S. fiscal policy hasn't helped us out much and so revenue is becoming worth less," he said.

In June, Woodside Petroleum Ltd. announced a six-month delay and A$900 million cost increase for its Western Australia A$14.9 billion Pluto LNG development.

Creeger said that LNG sales talks to justify a second processing unit, or train, at its Australia Pacific LNG venture, are well advanced.

Last week, the partners gave a green light for the $14 billion first phase, which includes building the first of two planned LNG trains with a total capacity of 9 million tons annually.

ConocoPhillips and Origin expect to make an announcement on the second train "before the end of the year", Creeger told reporters.

While China's Sinopec is the foundation customer, LNG sales from the second train will likely be split between two or three buyers, Creeger said. Countries like Japan, China, Korea and India remain the targeted markets, he said.

Drilling at Conoco's Browse exploration joint venture with Karoon Gas Australia Ltd. may resume by end-2011 after significant delays caused by regulatory issues.

Expected to cost "close to 500 million U.S. dollars," the five-well program will establish the amount of reserves, though ConocoPhillips believes the field may contain "multiple" trillions of feet of gas, Creeger said. Drilling is expected to take 18 months to two years.

Development options include a floating LNG plant, a facility at James Price Point onshore Western Australia, or tying into Inpex Corp's planned Ichthys project, from where gas could be piped to Darwin LNG, Creeger said.

ConocoPhillips is optimistic of agreement this year with Perth-based New Standard Energy on exploring the junior company's Goldwyer shale gas project in the onshore Canning Basin, Western Australia. A non-binding deal was announced by New Standard recently.

"Our plan is to secure a rig and start drilling next year in that basin," Creeger said.

Shell, PetroChina JV Awards Multibillion Dollar Queensland LNG Contracts to CB&I Consortium

Royal Dutch Shell PLC and PetroChina Co. said August 16 that design and early engineering work is to begin on a multibillion dollar gas-export plant in Australia, giving a shot in the arm to a project that is lagging rivals in the race to capitalize on rapid Asian energy demand growth.

The award of a contract for front-end engineering and design work to a consortium comprising Chicago Bridge & Iron Co., Japan's Chiyoda Corp. and Italy's Saipem SpA is a key step toward the plant's approval and construction at Gladstone in Queensland State.

It comes nearly a year after Shell and PetroChina acquired the project through their joint A$3.4 billion takeover of coal seam gas developer Arrow Energy Ltd.

They rejected bids from three other international consortiums for the preliminary design and engineering work, which will last 12 months.

Shell and PetroChina are among several international energy companies vying to convert gas trapped in coal seams beneath the Earth's crust into liquefied natural gas that can be shipped overseas. The projects are set to bolster state and federal government coffers through tax and royalty streams, but risk worsening skills and equipment shortages as an unprecedented resources boom takes place in Australia.

Queensland's LNG output is set to reach at least 25 million metric tons by 2020, surpassing Australia's current LNG production that totaled 20.8 million tons in the year to June 30, according to a report issued by EnergyQuest, a consultancy.

"Labor shortages are likely to be a major constraint on projects meeting their timetables. Shortages are only beginning to emerge but are expected to intensify in 2012, particularly for project sub-contractors," EnergyQuest said.

BG Group PLC and a consortium led by Santos Ltd. have already started construction of separate gas-export projects at Gladstone. Last month, Origin Energy Ltd. and ConocoPhillips approved their Australia Pacific LNG project, and have wrapped up the sale of a 15% stake in the venture to China Petrochemical Corp.

Shell and PetroChina's plans involve the initial construction of two processing units, known as trains, at Gladstone that are capable of producing a combined 8 million tons of LNG annually for export. The companies say annual capacity could be doubled to 16 million tons of LNG in future by adding two further trains.

"The design will use Shell's proprietary LNG technology," Andrew Faulkner, chief executive of Arrow Energy, said in a statement.

Technology for liquefying coal seam gas for export is untested on a large scale, while developers also need to overcome issues presented by coal seam gas's lower heat content relative to conventional natural-gas supply.

Western Australia Seeks To Ease Environmental Impact of Wheatstone LNG

Western Australian Environment Minister Bill Marmion said August 19 he has imposed 24 "tough" conditions on Chevron's proposed Wheatstone liquefied natural gas export project in the state's northwest.

Marmion said in a statement that assessing Wheatstone has been "complex," and he will consult with other Ministers to "obtain final agreement on the conditions" for the A$25 billion liquefied natural gas venture.

The consultation with Chevron and Government ministers over the conditions is likely to take a "couple of weeks", a spokeswoman for Marmion told Dow Jones Newswires.

Chevron, which needs state and federal government clearances before it can commit to Australia's next big LNG venture, has flagged a final investment decision in the second half of this year.

A Chevron spokesman said the company is "working through the details" of Marmion's determination of public appeals against a mid-June report from the Environmental Protection Authority.

"We look forward to a timely decision by the State and Federal Ministers for the Environment," he said.

The EPA report stated that Chevron's proposal to build the Wheatstone plant with an output capacity of up to 25 million metric tons of LNG a year should be allowed to proceed as long as the local environment is protected.

In determining four appeals--one from Chevron and three by Western Australian conservation groups--Marmion agreed to "strict" conditions proposed by the EPA, such as protecting whales and turtles, and requiring the U.S. company to offset up to 2.6 million metric tons a year of greenhouse gas emissions.

Marmion said he also strengthened the EPA conditions by prohibiting any blasting at night during the seasonal humpback whale migration along Western Australia's coastline.

If given the go-ahead, Wheatstone will help Australia surpass Qatar as the world's biggest exporter of liquefied natural gas by 2020.

The project aims to deliver LNG to customers in Japan and South Korea beginning 2016.

Wheatstone would be Chevron's second major LNG project under development in Australia, after the A$43 billion offshore Gorgon project in Western Australia.

Arrow Energy Awards FEED Work to Saipem, Chiyoda and CB&I JV for LNG Project in Queensland

Arrow Energy has taken another step forward with the multi-billion-dollar LNG plant in Queensland, awarding the Front End Engineering Design (FEED) contract on the Arrow LNG Project to CJV, a consortium composed of Saipem, Chiyoda and CB&I.

Planned for Curtis Island off the coast of Gladstone, the Arrow LNG Plant aims to initially build two trains with a processing capacity of 4 million tonnes of LNG per annum each, with the potential to double the capacity by adding another two trains and exporting up to 16 million tonnes of LNG a year.

The LNG plant will be supplied with coal seam gas from the Surat and Bowen Basins in Queensland.

“Our FEED contractor will undertake the preliminary engineering, design and planning to provide us with a project specification for our LNG Plant and facilities,” said Arrow CEO Andrew Falkner. “The design will use Shell’s proprietary LNG technology.”

The FEED study will commence immediately.

Additionally, the Arrow LNG Project has awarded a power supply concept select contract to Parsons Brinckerhoff to determine options for power supply to surface facilities to develop Arrow's coal seam gas projects in the Surat and Bowen Basins.

The project operator, Arrow Energy is owned by a 50/50 joint venture between PetroChina and Royal Dutch Shell.

Wheatstone Clears Environmental Approval Hurdle

Final environmental approval has been given for Onslow's Wheatstone LNG development.

Environment Minister Bill Marmion said approval was granted with 25 conditions protecting marine fauna, including whales, turtles and dugongs.

Approval followed the Minister's consultation with the ministers for State Development; Lands; Planning; and Indigenous Affairs, as required under the Environmental Protection Act 1986.

Significantly, the environmental conditions require:

· immediate suspension to dredging if coral outside defined zones is damaged

· no blasting at night during peak nesting and hatching seasons for marine turtles and no piling activity at night during the southern whale migration when humpbacks are travelling with their calves

· $13million in environmental offsets, including $3.5million over four years to improve management of critical habitats for humpback whales, dugongs and snubfin dolphins in Pilbara waters

· reductions in greenhouse gas emissions through offsetting approximately 2.6 million tonnes per year of reservoir carbon dioxide emissions

"The State Government will continue to ensure the highest environmental standards are applied to protect the local community and its environment," Mr Marmion said.

"This is a huge development for Western Australia. At its peak, the construction workforce for Wheatstone is expected to reach 3,000 people, in addition to a further 3,500 indirect jobs and billions of dollars in locally purchased goods and services."

Woodside Confident on Browse LNG Decision by Mid Next Year, but Warns on Improving Safety Standards

Woodside Petroleum Ltd. (WPL.AU) remains confident it will be able to decide whether to approve construction of the Browse liquefied natural gas project in Western Australia State by the middle of next year, despite recent delays caused by community protests.

But Chief Executive Peter Coleman warned that Australia's petroleum industry, currently experiencing a boom in big LNG developments, needs to improve safety standards to match those in several overseas countries.

Oil companies are racing to develop Australian gas reserves to feed strong demand for cleaner fuels in Asia, but are wary of letting commercial pressures compromise their safety guidelines following the damaging Macondo and Montara offshore incidents in the past two years.

Coleman was speaking alongside other oil and gas executives at a conference dedicated to using the lessons from Macondo and Montara to improve global safety standards. In 2009, the Montara well, operated by Thailand's PTT Exploration & Production PCL, spilled oil into the Timor Sea north of Australia over a 10-week period.

A more catastrophic event occurred in the Gulf of Mexico in April 2010, when the Deepwater Horizon rig drilling the Macondo well exploded and sank, killing 11 and touching off the worst marine oil spill in U.S. history. The well, majority owned by BP PLC (BP), spilled 4.9 million barrels of crude oil before it was sealed.

"Australia's (safety) performance compared with other international best practice, in a number of areas, is lagging," Coleman said. "We have the best operators in the world and yet our performance is not where it can be...we can, and we must do better," he said.

Speaking to reporters after his speech, Coleman said that Australian companies often "set the bar too low" on safety outcomes, and "we feel good about what we've achieved on a relative basis, in an Australian context".

Meanwhile, Woodside is moving ahead with preliminary engineering studies for Browse, including some geotechnical work at the James Price Point site that is critical to the design of the project's foundations, Coleman said.

"That (geotechnical) work is now progressing as well. It was delayed for a few weeks while we worked through some of the issues up there," Coleman said.

"The crews are now operating on site and we've had all of the equipment there, so we're confident we'll be able to get through that front-end engineering and design process and get to that final investment decision by the middle of next year," he said.

Early stage work on Browse was delayed by protests and blockades last month at the James Price Point site, which is roughly 60 kilometers north of the coastal resort town of Broome.

The project is seen as Woodside's next major LNG development after its current Pluto project, which is running behind schedule and over budget.

INDIA

GSPC, Adani Group JV to Invest 50/50 in Mundra LNG Terminal

With the State Government’s nod to a 50/50 joint venture between Gujarat State Petroleum Corporation Ltd (GSPC) and the Adani Group to develop an LNG import terminal at Mundra, the western state’s third LNG terminal is expected to be ready in the next three years.

The JV partners are likely to invest an estimated Rs 4,000 crore in the debt-equity ratio of 70:30, a senior official said.

The two partners would kick start work soon on the much-awaited terminal, whose initial capacity to import LNG would be five million tons per annum (MTPA). It would be completed in 36 months.

This follows the State Government’s formal approval to GSPC on August 9 to go ahead with the Mundra LNG terminal, for which the Adanis had signed an MoU with the State Government during the Vibrant Gujarat event in 2007. Originally, this LNG was proposed to be set up in a tripartite agreement, with 33% partnership each between GSPC, Essar and the Adanis.

“However, with the decision to locate the terminal at Mundra, Essar had exited from the project as it favored the terminal to be located at Vadinar, next to its oil refinery in Jamnagar district,” sources told Business Line.

Gujarat currently has two LNG import terminals. The first terminal was set up by Petronet LNG Ltd at Dahej in Bharuch district for receiving and regasification of imported LNG. It has a capacity to import 10 TPA of LNG which is being expanded to 15 MTPA. Besides, Petronet LNG, a joint venture promoted by GAIL (India) Ltd, ONGC, IOCL and BPCL, is also setting up a 5 MTPA terminal at Kochi in Kerala.

The second terminal in Gujarat was set up at Hazira in Surat district by a JV of Shell Gas BV and Total Gaz Electricite Holdings France. A storage and regasification terminal, it is also increasing capacity from 3.5 MTPA to 5 MTPA. The Hazira LNG terminal was the first to introduce spot LNG supplies into India.

INDONESIA

ExxonMobil Decides to Sell Interests in Indonesia Aceh Gas Fields and Arun LNG Plant, Signs $746.3 Mln EPC Contract for Banyu Urip Field

ExxonMobil announced August 8 that it intended to sell its shares in three companies associated with gas and liquefied natural gas producing operations in Aceh – Mobil Exploration Indonesia, ExxonMobil Oil Indonesia and Mobil Indonesia LNG.

The company reported in a press statement sent to The Jakarta Post that the assets to be sold included the Arun field and the North Sumatra offshore field. According to the company’s data, as of 2010, those assets produce about 215 million standard cubic feet of gas per day (mscfd).

“The shares marketed doesn’t involve ExxonMobil’s other projects or interests in Indonesia,” read the statement.

The decision to sell the shares is consistent with the company’s long-standing practice of continuously reviewing assets for their contribution to the company’s operating and financial objectives, the statement added.

ExxonMobil has been operating in Indonesia for more than 100 years. Its current projects cover the Cepu block in Central Java, East Natuna in Riau Islands and the coal bed methane (CBM) evaluation in Kalimantan.

In the first week of August, the firm signed an engineering, procurement and construction contract worth US$746.3 million for the Banyu Urip field at the Cepu block. The field’s maximum production capacity is estimated to hit 165,000 barrels of oil per day.

Gas in Aceh was discovered by Mobil Oil Indonesia in 1971. After studies, the government and partners then set up an LNG plant in Arun and began exporting LNG to Japan in 1978.

State oil and gas firm PT Pertamina currently holds a 55 percent stake in the Arun LNG plant. ExxonMobil owns 30 percent and a consortium of Japanese buyers owns 15 percent.

Arun, which is the oldest LNG plant in the country, saw its production peak in 1994, when the company exported 224 cargoes of gas, or 16.2 million tons. The field’s gas is expected to run out in 2014.

The plant’s 2011 output might fall 31 percent to 29 cargoes, from 38 cargoes last year, a Reuters report says. Of that amount, 26 cargoes will be sold to overseas buyers and the rest to state fertilizer producer PT Pupuk Iskandar Muda.

Pertamina had earlier announced its plan to convert the Arun LNG plant into an LNG receiving terminal in 2014. The state company claimed that it was ready invest around $80 million to materialize the plan.

Pase Energy, a regional enterprise in Aceh, has also proposed to the government to play a role in the receiving terminal project.

The receiving terminal was planned to have a total capacity of storing 100 million standard cubic feet per day (mmscfd). To fill the terminal, Pertamina said that the LNG might come from Qatar and Malaysia.

Indonesia is the third-biggest LNG exporter in the world after Qatar and Malaysia. In addition to Arun, the country has two other LNG plants: Bontang in East Kalimantan and Tangguh in West Papua.

To boost the utilization of LNG in the country, Indonesia plans to build three floating storage and re-gasification units (FSRU) in Belawan, North Sumatra, West Java and Central Java. In addition, eight mini LNG receiving terminals will also be built in the eastern region of Indonesia

The Belawan and West Java storage facilities are scheduled to begin operating in 2012, with respective capacities of 1.5 million tons per annum (mtpa) and 3.7 mtpa.

Pertamina, PLN to Establish LNG Shipping Company that Will Create Eight Mini LNG Terminals

State oil and gas firm PT Pertamina and state electricity utility PT PLN have agreed to jointly establish a liquefied natural gas shipping company to supply eight mini LNG receiving terminals to be installed in eastern Indonesia.

PLN primary energy director Nur Pamudji said he expected that the preparation to set up the new company would be completed this year at the latest. “The working group is now discussing the plan, including the number of vessels and their capacity. We hope to complete the preparation this year,” he said on August 8.

However, he declined to disclose the investment value and the ownership share between PLN and Pertamina in the planned company.

Pertamina spokesman Mochamad Harun confirmed the plan to establish the new company, saying that it was a follow up of the MoU signing between the two state firms on the development of eight mini LNG terminals in March this year.

He reported that the State-owned Enterprises Ministry and the Energy and Mineral Resources Ministry had approved the plan. The ministries fully supported the plan as it was suitable to improve synergy among state companies, he claimed.

“We have no problem with the ministries. This plan is positive because it promotes synergy among state-owned enterprises,” said Harun. The shipping company was scheduled to begin operation after the construction of the first LNG terminal had been completed, he added.

In March, PLN and Pertamina signed an agreement to build eight mini LNG plants, which aimed to help the electricity company ensure gas supply for its power plants in eastern Indonesia and improve its operational efficiency.

The development of the eight receiving terminals will be divided into three phases. In the first phase, four terminals will be built in Bontang and Balikpapan in East Kalimantan, Pasanggaran in Bali, and Kendari in Southeast Sulawesi.

In the second phase, two terminals will be set up in Mataram in West Nusa Tenggara and Banjarmasin in South Kalimantan. Those terminals will begin operation in 2013. The remaining two terminals will be constructed in Gorontalo and Halmahera, North Maluku, and are scheduled to start operation in 2015.

Pertamina data shows that the eight LNG receiving terminals would have a combined total capacity of 177 million standard cubic feet per day.

Gas terminals are more suited to the region as there are not enough gas pipelines to transport the gas in eastern Indonesia as there are in western Indonesia, Pertamina president director Karen Agustiawan said in earlier reports.

JAPAN

Japan’s Osaka Gas Plans 230,000 cm Tank at Senboku LNG Terminal

Osaka Gas Co, Japan’s second-biggest city gas distributor, said on August 30 it would build a liquefied natural gas tank at its Senboku LNG terminal 1 to meet rising demand for natural gas.

The company aims to start construction of the tank with capacity of 230,000 cubic meters in September 2012 and complete it in November 2015.

Japan’s LNG imports are rising at a record pace this year as utilities ramp up gas-fired power generation to offset a near-record low in nuclear plant utilization in the wake of the Fukushima radiation crisis.

Terminal 1 handled 1.1 million tonnes of LNG in the year ended in March, the company said in a statement.

EUROPE / AFRICA / MIDDLE EAST

MOZAMBIQUE

KBR Wins Pre-FEED at Anadarko's LNG Plant Offshore Mozambique

KBR was awarded a contract by Anadarko Mozambique Area 1, Ltd., to perform a pre-front-end-engineering and design (pre-FEED) study for a prospective LNG plant in Mozambique, Africa.

The award of the contract follows the recent natural gas discoveries by Anadarko and its partners in the Rovuma Basin offshore Mozambique. The pre-FEED study is designed to help Anadarko further assess the viability of developing an LNG facility to export natural gas from the region. Partners in the Joint Venture are Anadarko, ENH, Mitsui, BPRL, Videocon, and Cove.

"KBR is proud to be selected by Anadarko and with a long, proven reputation as a key leader in the development and construction of many of the world's LNG facilities, we will deliver a reliable study in the early stages of this important LNG development," said Mitch Dauzat, President, Gas Monetization. "KBR consistently delivers complex LNG projects on time and within budget with a demonstrated ability to deliver in challenging, remote locations. We look forward to applying our experience and collaborating closely with Anadarko and partners to meet their goals for this phase of the Mozambique discovery."

UKRAINE

Ukraine Selects Companies to Participate in Tender to Develop Feasibility Study for LNG Terminal

Five companies have won through to the second stage of a tender to develop a feasibility study for a liquefied natural gas terminal, the head of the state agency for investments and national projects management, Vladyslav Kaskiv, has said at a press conference in Kyiv.

According to him, in particular, the following companies will participate in the second stage of the tender, which will end soon: Ramboll Oil&Gas (Denmark), Foster Wheeler Iberia, Socoin, Sener (all based in Spain), and Technique Italy (Italy).

At the same time, the following companies dropped out of the tender: Zagope (Portugal), Ambetech (the United States), Sweco (Finland) and the Ukrainian subsidiary of PricewaterhouseCoopers. Kaskiv said that these companies would not be allowed to take part in the second stage of the tender due to the improper preparation of their tender documents.

According to Kaskiv, the winner of the tender will be announced by September 20, 2011 and the development of a feasibility study will take about three or four months.

He said that Ukraine continues seeking a partner to supply gas for the LNG terminal and hopes to resolve the issue by next year. In particular, he noted that Ukraine is currently in talks with Azerbaijan.

"Ukraine is prepared to guarantee a long-term gas purchase contract," he said, adding that the term of the contract would be about 10-15 years.

As reported, Ukraine on July 8, 2011, called a tender to prepare a feasibility study for the construction of an LNG terminal.

The preliminary project foresees the supply of the first consignments of liquefied gas amounting to two billion cubic meters per year by 2014, bringing the volume to five billion cubic meters per year by 2015 and to ten billion cubic meters per year by 2017.

ISRAEL

Israel's National Planning Council Approves FLNG Terminal Plan Offshore Hadera

Israel's National Planning Council has given final approval for a plan to establish a floating LNG terminal off the country's central Mediterranean coast, the council said on August 3.

The proposed terminal is to be located off the coast of Hadera.

The terminal, which is due to be completed by the end of 2012, will serve Israel Electric Corp and other natural gas consumers and be a backup for local natural gas supplies.

"The approval of the project is crucial and will guarantee gas supplies to the local economy until the Tamar offshore field comes online," National Infrastructure Minister Uzi Landau said.

His ministry has been pushing the floating terminal option in order to deal with an expected shortage of natural gas possibly as early as mid-2012, and that concern has been exacerbated in recent months following the cutoff in gas supplies from Egypt.

In addition, the sole local supplier, Yam Thetis, expects that its Mary B well off Israel's southern Mediterranean coast will be depleted by 2013, though experts believe that it could well be sooner.

State-owned Israel Natural Gas Lines, which is in charge of the infrastructure for the project has tentatively selected Norway's APL to supply it with the offshore buoy technology for the terminal.

In June, Israel's Public Utilities Authority (Electricity) approved a request by the IEC to lease an LNG tanker and set up infrastructure in order to bridge an expected gap in natural gas supplies in 2013.

Earlier, in May, the IEC chose Houston-based Excelerate Energy as a sole supplier of LNG noting that it was the only company that could meet its very tight timetable for completing the planned project by the end of 2012.

Israeli energy industry sources said that the two companies are negotiating a supply agreement, and according to the plan the buoy will be located 10 km off the coast and will link up to a pipeline, which will transport the gas to the national transmission network.

During the first week of August, Landau instructed the country's Natural Gas Authority to freeze the planning for a permanent LNG terminal off coast of Hadera.

Israel's national infrastructure and finance ministries had originally planned for a permanent LNG terminal that would begin operation in 2015.

In January 2010, the government's tenders committee received six bids for the proposed permanent terminal: Israel's Delek Energy jointly with Teekay LNG; Norway's Hoegh; Norway's Golar LNG; Excelerate Energy Inc; Southern Union Company along with BG Group and Japan's NYK. But due to the situation with Egypt and the uncertainty over the exact timetable for delivery of gas from the Tamar field the two ministries decided on a floating terminal but continued planning for a permanent terminal.

Meanwhile, ministry officials have said that plans for the permanent terminal will not proceed until the floating terminal is up and running and the situation and need for a permanent facility can be re-evaluated.

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