ConocoPhillips – committed to Darwin

ConocoPhillips – committed to Darwin

Hatfield: We moved into this office [in the Pandanas complex] in early November [2008] from our office at the Darwin LNG plant site at Wickham Point. We transitioned our operation from Perth to Darwin a couple years ago. The vision at that time was to have a proper office for the staff that supports our Darwin LNG operations as well as our offshore operations at Bayu-Undan. Originally when we moved up here we were in the construction dongas and permanent buildings out at the Darwin LNG Plant out at Wickham Point and, through a market review, design, construction and fit out process, we were able to move into town late last year. We’ve taken all six floors, and have all of our groups here that support our Bayu-Undan and LNG operations - a bit over a hundred people including employees and contractors - and we still have people out at the Darwin LNG plant that run the operation there, plus the people offshore.

TQ: That’s surprising because one could assume that once you’d been up and running, it would pretty much run itself.

H: I wish it were that easy. In the project phase we had several thousand people here, and a very big presence in Darwin. Now that we’re in operations it’s a much smaller group and it’s really a pretty lean staff by normal operating standards. There’s a fair bit of work to do in terms of just managing day to day operations.

TQ: Will new exploration soon be going on offshore at Bayu-Undan?

H: Not exploration as such, however we’ve got a drilling rig that will show up in April or so, that’s going to drill some additional wells for us. Bayu-Undan is producing very well, but as we’ve been on production for several years now, the wells start to produce less, in some cases. In other cases, as we learn more and more about the field, we find good places to put new wells. So the drilling program that we’ve got, starting in April and lasting over a year, will access some new areas of the field.

TQ: How long do you anticipate Bayu-Undan will operate?

H: The field life goes beyond 2020 - so it’ll be around for a long while.

TQ: We’ve heard in the past that Darwin is an energy production success story worldwide. Is that true?

H: That’s definitely true. We’ve had a number of people from other companies who were interested in the operation of our plant to see how Darwin LNG performs. What does the plant look like? How is it set up? So it is a bit of a showcase for us. The plant has performed very well. It’s been reliable and is definitely viewed as a success within ConocoPhillips and within the industry as well.

It’s certainly one we’re quite proud of, and one that probably played some role in our successful entry into the Origin joint venture, where we bought into a 50-50 joint venture with Origin Energy over in Queensland to develop coal seam gas. The downstream component of that development will be based on the technology that we have here at our plant in Darwin.

“The plant has performed very well. It’s been reliable and is definitely viewed as a success within ConocoPhillips and within the industry as well.”

TQ: What about the future? We know about the discovery of Barossa / Caldita in the Timor Sea, but we haven’t heard anything about it for some time.

H:Caldita / Barossa is in the appraisal phase. We recorded some seismic offshore back in 2007, and we’re processing and interpreting that seismic to help us understand what the subsurface looks like to answer questions like: What does the reservoir look like? How many wells and what facilities would it take to develop the field? How complex is the structure below the seabed where we’d actually be drilling our wells? Then from that we can determine the development scenario.

But because Caldita / Barossa is still in the exploration and appraisal phase, it’s managed in our Perth office. The geoscience support we have for Bayu as well as for other exploration opportunities is provided out of Perth, as are other major projects. Here in Darwin we’re focused on operations, on maximising our Bayu-Undan and LNG operations.

TQ: So Perth is looking after the Sunrise development?

H: That’s right. They’re working on Sunrise with the different co-venturers we have in that development. They’re looking at the different offtake options for the gas, and Darwin is certainly one of the options that’s being evaluated. But as a joint venture we’ll have to come together and jointly evaluate the different options that we have before a decision’s made as to where that gas would go.

TQ: Do we have any idea of how that uncertain economic future will affect ConocoPhillips in the Northern Territory?

H: We’re very committed to our Darwin LNG facility, to our Bayu-Undan operations. Although these are uncertain times in terms of where the global economy is headed, our focus is to make our developments as cost effective as possible, recognising that they’re going to be here for a long time. It’s a very solid operation that we have here and one that’s viewed very favorably across the ConocoPhillips corporation.

Live cattle trade remains strong

Having just returned from Indonesia, by far the greatest importer of Territory live cattle, and the Philippines, Troy Setter from the North Australian Cattle Company (NACC) is cautiously optimistic. “The international economic downturn has created a certain amount of uncertainty in the marketplace, but Indonesia hasn’t been hit as hard as some of the other areas of the world,” he observes. “However, it’s making planning harder than what it usually is, but we’re still seeing good demand from Indonesia.”

In many ways, Indonesia is the live export trade, having taken 75% of Australia’s live cattle last year. The cattle are off loaded at various Indonesian ports and egested in massive feedlots where they are fattened on industrial by-products like tapioca, molasses and pineapple. Most are later killed and sold at the country’s wet markets, the meat eaten fresh. “We’ll see similar numbers as last year go through,” forecasts Adam Hill, from the NT Livestock Exporters Association. “If we can keep it similar, the industry would be quite happy with that, given the economic situation. If it were the same as last year’s record total – that would reflect the strength of the trade.”

Exports have started the year off at a slower pace than last year at this time, but that is more to do with the weather conditions in Australia than the international economy. The flooding of roads in the Barkly region, a major cattle production area (see page 4), and the associated cut in the road link to Queensland has reduced the numbers of cattle. There were also fewer ships sailing into Australia from South East Asia over the wet season, but that has since accelerated and shipments from April onward will see large numbers leaving Australia once again.

Export markets are also set to expand. In the second half of 2009, Vietnam will import its first shipment of Territory live cattle into new feedlotting facilities currently under construction in Nha Trang. Vietnamese buyers and government officials have been working for two years with the Northern Territory Government and the NT Cattlemen’s Association, preparing for the first shipment. “The Vietnamese industry will be pretty much a mirror image of Indonesia, as far as the structure of the process,” says Hill, who has been advising the Vietnamese. “We’ve supplied them with plans based on the Indonesian setup. But they’re targeting a different market – the high end with primary cuts going into restaurants and hotel chains, with secondary cuts sold in the wet markets.”

“If you’re a developing feedlot in another country you would head to Indonesia to learn about it. That’s what Vietnam has done.”

If the Vietnamese wish to make a solid start importing cattle from the Territory, they could do worse than take a note from the Indonesian handbook. “Arguably, Indonesia have mastered the art of feeding tropical livestock, and particularly cattle, in high humidity areas,” explains Setter. “If you’re a developing feedlot in another country you would head to Indonesia to learn about it. That’s what Vietnam has done.”

Indonesian buyers of Australian cattle have many issues to contend with as the international economic situation begins to stabilise. Their main concern is continuity of supply and continuity of affordable products. They are plagued by price fluctuations driven by the rise and fall of world oil prices, the Australian dollar, and seasonal conditions, making it difficult for marketing their products. They must keep their prices competitive because other protein sources can be substituted by the consumer if the price is not right.

While the Australian dollar’s drop in value has been positive, the Indonesian rupiah’s value has fallen dramatically against the American dollar. It is the American dollar that is the currency used in the live cattle trade with Australia. “I think it’s going to be a challenging year,” says Setter. “There’s going to some highs and lows, but I think the indications are looking good. I think 2010 will be a better year for Indonesia. You have to remember that this year there’s two elections in Indonesia, and they can be very interesting.”