|Alcan May Buy Gas From Rift Oil for Australian Plant
By Angela Macdonald-Smith
March 21 (Bloomberg) -- Alcan Inc. signed an initial accord with Rift Oil Plc that may result in the world's second-biggest aluminum producer buying natural gas from a field in Papua New Guinea for an alumina refinery in the far north of Australia.
The company needs 40 billion cubic feet a year of gas for 20 years for the Gove plant and London-based Rift still needs to prove the Douglas field is big enough, Stefano Bertolli, an Alcan spokesman in Brisbane, said today. Rift's Douglas field is one of several potential supply options being considered, he said.
An agreement Alcan had earlier to buy gas for Gove from Exxon Mobil Corp.'s proposed $5.5 billion project to pipe gas from Papua New Guinea to eastern Australia lapsed late last year after the group that was to build the line decided the project was uneconomic. That prompted Alcan to study alternative options, including coal-seam methane and liquefied natural gas.
``We signed a non-binding MOU with Rift and they're going to explore to see if there are enough reserves there, and if there are then we're going to have to see how it moves forward,'' Bertolli said in a telephone interview. ``There are many options on the table and this is one of them.''
Last October Alcan agreed to start studying a gas-to-liquids project with Arrow Energy NL that would use coal seam gas from Brisbane-based Arrow's fields in Queensland. The study was to study gas-to-liquids against other options available for energy supply to Alcan's Australian operations.
Arrow said earlier this month the initial studies showed a plant costing about A$1 billion ($802 million) and producing about 20,000 barrels a day of diesel, naphtha and liquefied petroleum gas may be economic.
Should a final agreement be reached with Rift, it would require the construction of a $1 billion pipeline to take gas from the Douglas field in Papua New Guinea's Western Province to Gove in the Northern Territory, the Australian said today, citing Ian Gowrie-Smith, chairman of Rift Oil. The pipeline would be shorter and cheaper than Exxon's proposed line as it may only supply Gove, the newspaper said.
Alcan, based in Montreal, isn't considering investing in the pipeline at this stage, Bertolli said. The company is spending $2.3 billion on expanding the Gove refinery and wants to switch fuel supply at the site to gas from fuel oil because it's more economic.
Rift will explore at Douglas over the next 12 months to see if there are enough reserves and the companies will then decide whether to seek a final gas sales agreement, with the possibility of gas deliveries starting in 2010 or 2011, Bertolli said.
Rift's Foreland Oil Ltd. unit owns 65 percent of the PPL 235 exploration permit in Papua New Guinea, which holds the Douglas-1 and Langia-1 gas discoveries, which may also contain condensates, Rift said in a March 20 statement on the initial accord with Alcan. New Zealand's Austral Pacific Energy Ltd. owns the rest of the permit.
Planned work in the permit ``is expected to be completed by mid-2008 and aims to provide sufficient information for the parties to proceed to a binding agreement to supply natural gas to Gove,'' Rift said in the Regulatory News Service statement.
Wellington-based Austral said in July the Douglas field may hold ``several hundred billion cubic feet'' of gas across an area of 40 square kilometers.
Rift and Austral are also equal partners in an adjacent permit, PPL 261, which lies within about 100 kilometers (62 miles) of the Juha and Hides gas fields and the Moran, Mananda and Kutubu oil fields.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at email@example.com .
Last Updated: March 21, 2007 01:48 EDT