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MEO Australia Verifies Costs Benefits Of Tassie Shoal LNG

MEO Australia (ASX: MEO) has confirmed its proposed Tassie Shoal liquefied natural gas development off northern Australia offers capital cost savings of up to US$4 billion (A$3.8 billion) compared with alternative development options.

Major international engineering firms WorleyParsons (ASX: WOR) and Arup have, with input from APCI, estimated that TSLNG would have a capital cost of about US$2 billion to produce 3 million tonnes per annum (MMtpa) of LNG.

This includes a contingency of 25% while a incremental investment of US$220 million will be required to increase nameplate production to 4MMtpa.

Scaling up the project to 3.6MMtpa and including pipeline; floating production, storage and offloading vessel liquids removal; and upstream costs takes the project to a cost of about US$6.28 billion.

This compares favourably with the estimated US$8.44 billion for an onshore plant at Darwin and US$10.1 billion for a floating LNG development.

"MEO currently holds a 100% interest in TSLNG and it's pleasing to see the globally competitive development costs re-affirmed by the technology and cost reviews by the industry's leading engineering firms," executive manager business development Robert Zammit said.

"Business development activities are focussed on providing a compelling fast-track commercialisation path for MEO equity gas, and potentially for other regional resource owners.

"Additionally, TSLNG represents one of several development options for potential farminees to MEO's WA-454P, particularly those seeking a clear line of sight to an LNG commercialisation path with existing environmental approvals and the potential for an equity aligned upstream and midstream plant ownership structure."

Tassie Shoal LNG

The TSLNG project is based on the design premise that liquids would be removed from the raw gas at the field location and dry gas piped to Tassie Shoal, where water depths are about 15 metres, for processing into LNG.

It is located close to many undeveloped gas resources in the region including the adjacent Blackwood and Heron discoveries in the nearby NT/P68 exploration permit and 400 kilometres from its wholly owned WA-454-P permit, which it is in the process of farming out.

The design includes a process plant designed to be constructed in a single module and carried by heavy lift vessel to site and placed directly on the sea floor as well as a LNG tank to be constructed in casting basin and wet towed to site, then ballasted directly onto sea floor

Both can be constructed at relatively low cost South East Asian sites.

Other advantages include a low cost seawater cooling process and the ability to be relocated at the end of project life.

TSLNG has secured Australian Federal Government environmental approvals for an LNG plant to be located at Tassie Shoal and has also been granted Major Project Facilitation status that endeavours to ensure that Commonwealth approval processes are coordinated with relevant state and territory government approval processes.

Nearby activity

MEO and Eni are currently preparing to production test the Heron South-1 well in NT/P68, which intersected two gross sandstone intervals of about 120 metres and 115 metres separated by about 130 metres of shale and silt.

Eni is also a participant in the Evans Shoal gas discovery, which is adjacent to NT/P68, and where an appraisal well is planned for 2012/13.

This has the potential to be considered together with any discoveries at Heron and Blackwood for a joint development.

TSLNG is also close to ConocoPhillips' (NYSE: COP) Barossa and Caldita gas fields. Three appraisal wells are planned at Barossa for 2013.

Last, but not least are MEO's Marina gas discovery and Breakwater oil prospect in WA-454-P.

Marina was discovered by ExxonMobil (NYSE: XOM) and Drillsearch Energy (ASX: DLS) in 2007 and is independently assessed to contain high estimate (3C) Contingent Resources of up to 302 billion cubic feet (Bcf) of gas and 29.5 million barrels (MMbbl) of oil.

The nearby Breakwater prospect could potentially host prospective resources of up to 2.7 trillion cubic feet (Tcf) of gas and 87MMbbl of condensate in the "gas only case" or 2.4Tcf of gas and 276MMbbl of oil/condensate in the "gas and oil case".

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