Shell exiting Greater Sunrise fields. Sells stake to Timor Leste for $300M

Oil and gas Shell is exiting the long-stalled Greater Sunrise offshore gas project in the Timor Sea, agreeing to sell its interest to the Timor-Leste government for $300 million. Shell follows the steps of ConocoPhillips which announced the sale in October. 

Located 150 kilometers south-east of Timor-Leste and 450 kilometers north-west of Darwin, Australia, the gas-rich Greater Sunrise field area offshore fields have been sitting undeveloped for years in part due to maritime border issues between Australia and Timor Leste, and in part due to differences in opinion on how to develop the assets, either via an onshore plant in Timor-Leste, or via an FLNG offshore facility. The project is operated by Australia’s Woodside.

The area contains the Sunrise and Troubadour gas and condensate fields, collectively known as the Greater Sunrise fields. The fields were discovered in 1974 and hold around 5.13 Tcf of gas and 225.9 million barrels of condensate.

Different views on development,

Timor-Leste government is hoping to develop the Greater Sunrise fields through a pipeline to the coast of Timor-Leste and the construction and operation of a natural gas processing plant in Beaço.

Commenting on the agreement to sell its stake in the project, EVP for Shell Australia, Zoe Yujnovich said the transaction, valued at US$300 million, would allow the Timor-Leste Government and joint venture partners to pursue their aspirations for the Greater Sunrise development.

“We respect the Timor-Leste Government’s determination to develop the Sunrise fields through an onshore LNG facility on its south coast. Although we formed different views about the optimal development scenario, we understand the priorities of the Timor-Leste Government and wish it well in pursuing its aspirations to develop this important resource for the nation.”

“This sale aligns with our global strategy to reshape Shell into a simpler and more resilient company. Our Australian portfolio remains strong as operator of both the QGC onshore natural gas project, Prelude FLNG and significant positions in the Gorgon and North West Shelf LNG projects,” Yujnovich said.

Timor-Leste’s Special Representative Xanana Gusmão stated: “Timor-Leste appreciates Shell’s willingness to sell its interests in the Greater Sunrise project…Shell’s attitude throughout the negotiations shows that it is ready to consider not only its commercial interests but also the interests of small nations.”

Shell’s attitude throughout the negotiations shows that it is ready to consider not only its commercial interests but also the interests of small nations.

The Timor-Leste Government’s purchase of Shell’s interest is conditional on receiving funding approval from the Timor-Leste Council of Ministers and National Parliament, as well as regulatory approvals and partner pre-emption rights.

The sale transaction comprises Shell’s permits NT/RL2 and NT/RL4 within Australia waters and PSC 03-19 and PSC 03-20 within Timor-Leste waters and associated governance agreements.

Shell’s Wednesday announcement of the Sunrise Area stake comes a little over a month after ConocoPhillips said it would sell its stake in the project to the Timor Leste government for $350 million.

At the time of the announcement, ConocoPhillips’ executive vice president, Strategy, Exploration and Technology said: “ConocoPhillips has a long history in Timor-Leste through our operated interest in the Bayu-Undan field. Although we differ with the government on its proposed development plan for Sunrise, we recognize the importance of the field to the nation of Timor-Leste, and the sale of our interest to the government gives them a working interest in this important development.”

The Sunrise Joint Venture partners are currently as follows: Woodside (Operator) with a 33.4% interest, ConocoPhillips (30%), Shell (26.6%) and Osaka Gas (10%). ConocoPhillips said it expected the sale to be complete in the first quarter of 2019. Shell did not provide the expected timeline.

Onshore LNG development

Energy Intelligence firm Wood Mackenzie in October said that the likely path for the development of the Sunrise fields was via an onshore LNG plant in Timor-Leste.

Woodmac said the development would require the construction of a new liquefaction plant and associated infrastructure; an FPSO to process and handle the condensate; construction of a pipeline connecting the FPSO to shore.

“Timor-Leste authorities are determined to harness the economic benefits of an onshore development. The Timor-Leste government is also pursuing the development of Sunrise to replace declining revenues from the mature Bayu Undan field.

“We believe the key onshore project risk is the construction of a greenfield LNG project in a country that has historically lacked large-scale infrastructure projects. The next step is for the project to put forward a viable development plan that all the project participants would be willing and happy to commit too,” Wood Mackenzie’s analyst David Low said in October.

Offshore Energy Today Staff