Hess writes down Equus development off Western Australia

US company Hess Corp. has decided to write down the full value of the proposed Equus gas-condensate development off Western Australia by $933 million (Aus.). The project has come off the boil because of the downturn in world oil prices and the high capital costs of development in Australia.

Hess will now focus its global attention to the Bakken shale in the US, Valhall field offshore Norway, and Liza field offshore Guyana.

This means that Hess’ partner in Equus, Woodside Petroleum Ltd., will have to find its own way to move forward with the discovery. The two companies had made an arrangement in April last year to begin a front-end engineering and design phase looking at the technical possibilities of tying in the discoveries to the Woodside-led North West Shelf gas project. Woodside had begun the engineering studies with the aim of arriving at a final investment decision for the project sometime this year.

Sixteen wells have been drilled on Equus since 2010, which resulted in 14 gas successes in eight fields across three permits: WA-70-P, WA-390-P, and WA-474-P. An estimated $6-billion investment was envisaged to bring the project to fruition and it would have been the first time that the NWS joint venture had processed gas from a third party.

The broad plan was development of the eight fields via a central semisubmersible gas processing facility at the hub of a subsea gathering system. The gas would then be piped to the NWS offshore facilities for transmission to the shore plant at Karratha on the Burrup Peninsula to supply the five NWS gas trains at optimum level for the next decade.

The eight Equus group fields are Mentorc, Bravo, and Nimblefoot with Cretaceous-age reservoirs; Chester and Rimfire with Cretaceous-Triassic reservoirs; Glenloth and Briseals in Triassic sands; and the Glencoe discovery in the Jurassic. The fields lie in 1,000-1,200 m of water and are 300 km west of the NWS gas plant on the Burrup.

In total the fields are thought to have recoverable reserves of 2-3 tcf of gas. The three Cretaceous fields have the highest condensate-gas ratio of 40 bbl/MMcf.

However the Hess 2017 budget has no room for the Equus plans.

Analysts have suggested that Woodside’s purchase of 25% interest in Scarborough gas field on the Exmouth Plateau from BHP Billiton Ltd. late last year could have been a complicating factor.

Woodside has since flagged the beginning of FEED in 2018 leading to a final investment decision for the Scarborough development by 2020. The company said it had started work with the Scarborough JV led by ExxonMobil Corp. with the aim of commercializing the gas resource that lies 220 km northwest of Exmouth in 900 m of water. Scarborough was discovered in 1979.

Development options for Scarborough include a floating LNG facility and a tieback to an existing onshore LNG facility.

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