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Within a few years, Dili stands to lose the revenue stream that it has relied on since gaining independence from Indonesia in 2002, as output dwindles at the Timor Sea''s declining Bayu-Undan field, jointly administered by Australia and East Timor. Australian independent Santos in March approved the Barossa field offshore Australia''s Northern Territory to supply backfill gas for its 3.7mn t/yr Darwin LNG plant in the state, replacing falling supplies from Bayu-Undan.
The field has provided gas for Darwin LNG since its first shipment in 2006, and received some respite in January when operator Santos said it would spend $235mn on infill drilling to extend the field''s life by 12-24 months, with drilling to start in the coming months. Santos and Bayu-Undan partner Italian firm Eni this month also pledged to work on plans to use Bayu-Undan''s facilities as a carbon capture and storage project, which if it goes ahead could provide a revenue fee for Dili.
The flow of funds from Bayu-Undan has been declining in recent years at the same time as Dili has been increasing its withdrawal rate to underpin budget spending, including construction of a road and airport along its southern coastline as part of a plan to build an oil and gas infrastructure hub, Scheiner says. The hub, known as the Tasi Mane project, would include an oil refinery as well as a liquefaction plant and LNG export facility for the 5.1 trillion ft³ (145bn m³) Sunrise field, which faces mounting challenges to ever reaching development.
Dili took a controlling share in the project by buying the stakes of Shell and US independent ConocoPhillips in 2018 for $650mn, borrowed from the Petroleum Fund. But this has done little to improve the viability of Sunrise for foreign investors concerned about political risk following Dili''s part-nationalisation of the project, as well as the technical issues facing the field in the form of the 3.5km-deep Timor Trough between Sunrise and the East Timor''s coastline.
Renewed international efforts to tackle climate change are already resulting in many potential LNG projects moving from possible to unlikely. And Dili says it is reconsidering buying the additional stakes in Sunrise and Tasi Mane, which would see a significant portion of the Petroleum Fund spent on a project with challenging economics. "East Timorwill have to move away from its dependence on oil and gas resources, and I am optimistic it can get through this challenge," Scheiner says.
Timor Sea gas developments
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As the world seeks to decarbonise, East Timor hopes that a plan for a giant carbon capture and storage (CCS) hub will help it find financial backing for a proposed liquefied natural gas (LNG) facility that would process gas from the Greater Sunrise fields.
Development of Greater Sunrise, first discovered in 1974, had stalled due to a now-resolved maritime border dispute between East Timor and Australia, and by disagreement with operator Woodside on whether to pipe gas to East Timor, also known as Timor Leste, or Australia, to process LNG for export.
"We want to have Greater Sunrise developed here in Timor Leste," Florentino Soares Ferreira, president of East Timor''s National Authority of Petroleum and Minerals (ANPM), told Energy Voice in an interview.
However, Woodside (ASX:WPL) CEO Meg O''Neill recently told Australian media that "the economics of taking (Sunrise) gas to Timor Leste and building new plants just are prohibitive – so that''s something that needs to get cracked – but the production-sharing contract (PSC) terms need to get sorted out first."
"The field is closer to existing LNG infrastructure (in Australia), there''s potentially some interesting opportunities there to use existing facilities. So just from an economics perspective, taking the gas to Timor-Leste and building a brand-new plant just doesn''t make sense."
Nevertheless, commercial and feasibility studies are ongoing, and Ferreira believes "Timor Leste is in a position to offer a much more competitive solution in terms of cost."
Although, he did concede that building an LNG plant in East Timor solely to process gas from Greater Sunrise did not make economic sense. Instead, the ANPM hopes that other potential fields offshore, such as Chuditch and Kelp Deep, can be tied into any development plan.
He added that the Woodside-led Sunrise Joint Venture, which includes Osaka Gas, as well as Timorese national oil company TimorGAP, need to work collaboratively to find the best solution.
Woodside has indicated that it could first develop Greater Sunrise''s large liquids resources, leaving the gas to be produced through a yet-to-be built onshore LNG export facility in East Timor without its financial participation. Alternatively, the gas could be sent to processing plants in northern Australia at a later date.
To fulfil East Timor''s dream of processing Sunrise gas on its soil at a greenfield export project would mean stumping up over $10 billion, possibly even as much as $16 billion to $20 billion, for the development.
Still, Ferreira is undeterred, "for a national oil company, such as TimorGAP, there are means to get the project bankable. There are also institutions willing to finance the project as Timor Leste is embracing carbon capture and storage (CCS). That''s why a lot of financing agencies are willing to finance Greater Sunrise."
"We have been talking to international financial institutions in Timor Leste and overseas. They see Greater Sunrise is a crucial project for Timor Leste and they are willing to finance the project," added Ferreira.
Despite Ferreira''s optimism, challenges remain, as acknowledged by Jose Ramos Horta, who last month won East Timor''s presidential elections. Horta recently told local media that "it will be difficult to find investors for Sunrise while parties have different views on the development concept."
"We are currently working on putting in place the legal, fiscal, and regulatory frameworks. We have engaged the Sunrise JV on this matter, and we look forward to wrap things up by the end of this year," said Ferreira.
Significantly, Woodside has said it is considering new investment opportunities, including the Browse and Greater Sunrise fields, on expectations that new supply will be needed to alleviate global energy market tightness, raising hopes that a deal can be struck with Dili.
Meanwhile, Ferreira is excited about the prospect for the Santos-led CCS project at the Bayu Undan field, which if successful will be one of the world''s largest carbon storage facilities.
He said the ANPM is currently discussing the commercial arrangements with Santos for the CCS project, which could hold up to 200 million tonnes of carbon dioxide (CO2).
East Timor''s revenue from Bayu Undan oil and gas was more than $170 million per month during the first quarter of 2022, but those revenues will disappear once Santos shuts down production, which it is aiming to do as fast as possible.
Santos (ASX:STO) is preparing to decommission the floating storage and offloading (FSO) facility, as well as platforms, at Bayu Undan offshore East Timor, as soon as possible, as it accelerates plans for the giant CCS hub at the mature field.
Santos aims to take a final investment decision (FID) by end-2022 on the CCS project, according to Ferreira. In March, Santos announced it had started front-end engineering and design (FEED) work for the proposed CCS project.
Analysts at consultancy Rystad Energy estimate capital expenditure for Bayu Undan CCS at more than $1.7 billion across capture, transport, and storage for the entire cluster project.
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