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Exxon, BHP approve $1.3 billion Australia Turrum project

US energy giant ExxonMobil Corp and partner BHP Billiton Ltd approved their $1.35 billion Turrum oil and gas project off Australia's southeast coast to meet rising domestic demand.

The Turrum development holds reserves of about 1 trillion cubic feet (tcf) of gas and about 110 million barrels of oil and condensate, ExxonMobil, the world's largest oil company, said in a statement.

First oil and condensate production from Turrum was expected to begin in 2011 at about 20,000 barrels per day (bpd), while total gas sales would commence in 2015 at about approximately 200 million cubic feet (mcf) per day, Exxon said. The Turrum project, located in the Bass Strait off the southern coast of Australia, is the second oil and gas project committed to by the Exxon-BHP partnership in the past seven months, following the decision last December to proceed with the A$1.4 billion Kipper gas project also in Bass Strait.

“Today's announcement means that we, with our joint venture partner, have collectively invested over A$3 billion in new oil and gas projects in Bass Strait in the last seven months,” ExxonMobil's Australian Chairman Mark Nolan told reporters.

Development of Kipper and Turrum have, until recently, been held back because of low domestic prices. But rising gas prices in Australia's east coast and a projected gas demand growth of 3.8% a year through 2030 have improved the economics of these gas projects.

Nolan said studies conducted by ExxonMobil have identified an additional 1 tcf of gas in and around its existing fields in the Bass Strait.

“The Bass Strait has a strong long term future. We estimate that there is still about 7 tcf of gas still to be produced, and we are confident that means we have over 30 years of gas remaining,” Nolan said.

The Turrum project is part of the Gippsland Basin joint venture in which BHP and ExxonMobil's subsidiary, Esso Australia Resources Pty Ltd, each have a 50% stake.

The venture currently produces about 130,000 barrels of oil and condensate a day, Exxon's Nolan said.

BHP said in a separate statement that it has approved an expenditure of $625 million for its share of development for Turrum.

BHP's share of capital costs for Turrum will bring its total current approved capital expenditure for its oil and gas business, which includes eight projects expected to come onstream between now and 2012, to $6.1 billion. (Reuters)