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French energy giant GDF Suez said on Thursday it is reconsidering a huge project for a floating gas liquefaction factory off northern Australia and might opt to build an undersea pipeline to Darwin.
The gas fields concerned continue to have "material value", the company said.
But the solution of a floating liquefaction plant to process the gas does not satisfy business criteria, the group said, in an important announcement for the Australian energy sector.
The overall project, called Bonaparte, involves an ambitious scheme using advanced technology to generate liquefied natural gas from resources off northern Australia.
The development of floating liquefaction plants is at the forefront of efforts to turn Australia into a leading supplier of LNG in Asia.
Liquefied natural gas, and related infrastructure, is being developed substantially in many regions of the world, and notably in North America to process gas from shale fields so that it can be transported in LNG tanker ships.
GDF Suez is a leading company in this sector and the biggest importer of LNG into Europe.
The company said that with its Australian partner Santos it was considering "other potential development options" for three gas fields situated west of Darwin and 250 kilometres out to sea.
"These options will include a pipeline connection to Darwin," GDF Suez said in a statement.
There is already a gas liquefaction plant in Darwin of which Santos is a minority shareholder.
The overall project is known as the Bonaparte LNG project and the three fields are called Petrel, Tern and Frigate.
- Huge costs -
GDF Suez and Santos "firmly believe that fields have material value," the statement said. But "their future development using floating LNG (liquefied natural gas) technology, although technically robust ... does not currently meet companies' commercial requirements."
GDF Suez said that "consequently, the proposed Bonaparte floating LNG project will not be taken into front-end-engineering and design phase at this point in time."
French oil and gas engineering group Technip was in competition with US firm KBR to work on the floating plant project.
In September, GDF Suez delayed for a year its final decisions for investment and operations for the Bonaparte project. It indicated then that it might take its decision on investment in 2015 and target opening operations in 2019.
The project for a floating LNG processing plant capable of liquefying 2.0 million tonnes of natural gas per year, was intended to enable GDF Suez to develop deliveries to markets in Asia.
The partners have never put a value on the cost of the enormous project in which GDF Suez would hold 60 percent and Santos 40 percent.
Several other projects for floating LNG plants are under construction or being built in Australia.
Among these is the pioneer project called Prelude, headed by British-Dutch group Shell, and a vast project called Ichthys in which French energy group Total has an interest.
The floating factories are a solution for fields which could not have been developed previously.
The development of this technology opens the way for Australia to become a big producer of LNG.
But the technical problems and costs involved are huge.
ROYAL DUTCH SHELL PLC