MELBOURNE - A proposed A$4.5 billion ($4.9 billion) Papua New Guinea-to-Australia gas pipeline came closer to getting the go-ahead yesterday, winning a new contract that could raise maximum gas sales to more than 85 per cent of capacity.
Project operator Exxon Mobil Corp said Alcan, the world's number-two aluminium producer,
had agreed to take 43.5 petajoules (41 billion cubic feet) of gas a year over 20 years from 2009 for its Gove refinery in northern Australia.
Before the agreement, maximum volumes committed under conditional deals represented only about 65 per cent of the pipeline's capacity.
Shares in the project's biggest stakeholder, Oil Search, surged 6.3 per cent to A$3.20 on the news but closed steady at A$3.01, as investors took profits.
"It seems to be two steps forward and one step back with this project and it always seems to be clutching for that crucial sales threshold to get them there, but this one is significant," said Gavin Wendt, associate director of Australian broker Intersuisse.
The agreement comes a day after Alcan said it ended a contract with a Woodside Petroleum joint venture to supply the refinery with gas from the Blacktip field off northern Australia.
That agreement was for a total 800 petajoules (PJ) of gas over 20 years and was estimated by analysts to be worth at least A$1.95 billion.
Alcan said it withdrew after Woodside increased the price by about 30 per cent.
The value of the PNG deal with Alcan - which plans a A$1.7 billion expansion of the Gove refinery to lift annual capacity by 1.7 million tonnes to 3.8 million tonnes - was not disclosed.
Exxon Mobil said the deal was a major step in achieving volumes required to underpin the project but the joint venture needed to notch up more sales before a final go-ahead could be given.
- REUTERS
