Business overview
2.2 Business overview
2.2.1 History and development
Since 29 June 2001, we have operated under a Dual Listed Companies (DLC) structure. Under the DLC structure, the two parent companies, BHP Billiton Limited (formerly BHP Limited and before that The Broken Hill Proprietary Company Limited) and BHP Billiton Plc (formerly Billiton Plc) operate as a single economic entity, run by a unified Board and management team. More details of the DLC structure are located under section 2.12 'Organisational structure' of this Report.
BHP Billiton Limited was incorporated in 1885 and is registered in Australia with ABN 49 004 028 077. BHP Billiton Plc was incorporated in 1996 and is registered in England and Wales with registration number 3196209.
The registered office of BHP Billiton Limited is 180 Lonsdale Street, Melbourne, Victoria 3000, Australia, and its telephone number is 1300 55 47 57 (within Australia) or +61 3 9609 3333 (outside Australia). The registered office of BHP Billiton Plc is Neathouse Place, London SW1V 1BH, UK, and its telephone number is +44 20 7802 4000.
2.2.2 Petroleum Customer Sector Group
Our Petroleum CSG is a global oil and gas business with producing assets in six countries across six continents and exploration opportunities in a further six countries. If it were a stand-alone business, our Petroleum CSG would rank approximately 25th among listed oil and gas exploration and production companies (based on production volumes). We believe that being part of the BHP Billiton Group gives the business the financial resources, risk tolerance and global reach of a much larger company, enabling us to compete for access to large, complex opportunities with the industry super-majors. In addition, we have developed highly specialised capabilities in a number of areas, including deep water exploration and development. As a result, we are able to focus our exploration and development activities on large, potentially high-return opportunities, such as our current development projects in the Gulf of Mexico and offshore Western Australia.
We organise our Petroleum CSG on a functional basis, with exploration, development, production and marketing functions all led out of our Houston headquarters, using common systems and standards.
Our total oil and gas production in FY2008 was 129.5 million barrels of oil equivalent, an increase of 13 per cent over our total production of 115.05 million barrels of oil equivalent from continuing operations in FY2007. Given that our Atlantis project was ramping up during FY2008, our Neptune project in the Gulf of Mexico produced first oil in July 2008 and the Angel and North West Shelf Train 5 projects off Western Australia and the Shenzi project in the Gulf of Mexico are scheduled to commence operations in FY2009, we expect that our total production will continue to increase.
We sell our crude oil production to refiners around the world at market prices. Gas is generally marketed under long-term domestic contracts and we export LNG under long-term contracts. Almost three-quarters of our contracted LNG sales volumes are subject to contracts that are either within four years of expiry or contain provisions allowing prices to be reset. However, more than a quarter of our currently contracted volumes are subject to long-term fixed-price contracts, some of which were priced in a lower price environment. Our production assets are as follows:
Bass Strait
Together with our 50-50 joint venture partner, Esso Australia, a subsidiary of ExxonMobil, we have been producing oil and gas from Bass Strait, off the southeastern coast of the Australian mainland, for almost 40 years, having participated in the original discovery of hydrocarbons there in 1965. We dispatch the majority of our Bass Strait crude oil and condensate production to refineries along the east coast of Australia. Gas is piped ashore to our Longford processing facility, from where we sell our production to domestic distributors under inflation-linked contracts with periodic price reviews.
North West Shelf
We are a joint venture participant in the North West Shelf Project in Western Australia The North West Shelf Project was developed in phases: the domestic gas phase, which supplies gas to the Western Australian domestic market mainly under long-term contracts, and a series of LNG expansion phases, which supply LNG to buyers in Japan, Korea and China under a series of long-term contracts. We also produce LPG and condensate.
We are also a joint venture participant in four nearby oil fields. Both the North West Shelf gas and oil ventures are operated by Woodside Petroleum Ltd.
Gulf of Mexico
Our production in the Gulf of Mexico has expanded significantly, with the Atlantis field and the Genghis Khan portion of the Shenzi field coming on line in FY2008 and the Neptune field commencing production in July 2008. We now operate five fields in the Gulf of Mexico, and hold non-operating minority interests in a further three fields. We also own 25 per cent and 22 per cent respectively of the companies that own and operate the Caesar oil pipeline and the Cleopatra gas pipeline which transport oil and gas from the Green Canyon area, where a number of our fields are located, to connecting pipelines that transport product to the mainland. We deliver our oil production to refineries along the Gulf Coast of the United States. Our Shenzi project is scheduled to commence operations in FY2009.
Liverpool Bay and Bruce/Keith
The Liverpool Bay integrated development consists of six offshore gas and oil fields in the Irish Sea, the Point of Ayr onshore processing plant in North Wales, and associated infrastructure. We deliver all of the Liverpool Bay gas by pipeline to E.ON's Connah's Quay power station. We own 46 per cent of and operate Liverpool Bay. We also hold a 16 per cent non-operating interest in the Bruce oil and gas field in the North Sea and operate the Keith field, a subsea tie-back, which is processed via the Bruce platform facilities.
Algeria
Our Algerian assets consist of our effective 45 per cent interest in the Ohanet wet gas development and our 45 per cent interest in ROD, the production sharing contract which consists of six satellite oil fields that pump oil back to a dedicated processing train.
Zamzama
We hold a 38.5 per cent interest in and operate the Zamzama gas project in Sindh province of Pakistan. During FY2008, Phase 2 of the project was completed. The design capacity of Zamzama is 470 MMcf/d of gas and 3,150 bbl/d of condensate. Gas is sold domestically.
Stybarrow
During FY2008, first oil was produced at Stybarrow, a nine well subsea development in approximately 825 metres of water approximately 65 kilometres offshore north Western Australia. The project uses a floating production storage and offtake facility with capacity of approximately 80 Mbbl of oil per day. We own 50 per cent of and operate the project.
Other Australia
We are the operator of the Griffin project (45 per cent BHP Billiton) interest where oil and gas are produced via the Griffin venture, a floating production, storage and offloading facility. We pipe natural gas to shore, where it is delivered directly into a pipeline and sold domestically. We also operate the Minerva gas field located offshore Victoria in which we hold a 90 per cent interest.
Trinidad
The Angostura project is an integrated oil and gas development located offshore east Trinidad. We are the operator of the field and have a 45 per cent interest in the production sharing contract for the project.
Information on Petroleum operations
Significant oil and gas assets
| Asset | Location | FY2008 Net Production (MMboe) | Net Proved Reserves (MMboe) |
|---|---|---|---|
| Bass Strait | Offshore SE Australia | 41 | 484 |
| North West Shelf | Offshore NW Australia | 29 | 407 |
| Atlantis | Gulf of Mexico | 8 | 101 |
| Shenzi / Genghis Khan | Gulf of Mexico | 1 | 25 |
| Liverpool Bay and Bruce/Keith | United Kingdom | 12 | 40 |
| Ohanet and ROD | Algeria | 8 | 25 |
The following table contains additional details of our production operations. This table should be read in conjunction with the production and reserve tables.
Australia/Asia
Name, location and type of asset
Bass Strait Offshore Victoria, Australia. Oil and gas production
Ownership and operation
We hold a 50% interest in the Bass Strait fields.
Esso Australia owns the other 50% interest and is the operator.
Oil Basins Ltd holds a 2.5% royalty interest in 18 of the production licences.
Title/lease
The venture holds 20 (1) production licences and two retention leases issued by the Commonwealth of Australia with expiry dates ranging between 2009 and 2019.
(1) Includes one production licence with additional partner Santos Ltd.
Facilities
There are 20 producing fields with 21 offshore developments (14 steel jacket platforms, three subsea developments, two steel gravity based mono towers and two concrete gravity based platforms).
Onshore infrastructure includes the Longford Facility, which includes three gas plants and liquid processing facilities, interconnecting pipelines, the Long Island Point LPG and crude oil storage facilities and an ethane pipeline.
The Bass Strait production capacity is as follows:
- Crude - 200 Mbbl/d
- Gas - 1,075 MMcf/d
- LPG - 5,150 tpd
- Ethane - 850 tpd
Name, location and type of asset
North West Shelf (NWS) - gas and gas liquids (LPG and condensate) North Rankin, Goodwyn, Perseus, Echo-Yodel and Angel fields offshore, Dampier in northwestern Australia. Gas, LPG and condensate production and LNG liquefication
Ownership and operation
We are a participant in the North West Shelf (NWS) Project, an unincorporated joint venture. We hold 8.33% of the original domestic gas joint venture. Our share of domestic gas production will progressively increase from 8.33% to 16.67% over the period from 2005 to approximately 2017. We also hold 16.67% of the Incremental Pipeline Gas (IPG) domestic gas joint venture, 16.67% of the original LNG joint venture, 12.5% of the China LNG joint venture, 16.67% of the LPG joint venture and approximately 15% of current condensate production.
Other participants in the respective NWS joint ventures are subsidiaries of Woodside Energy, Chevron, BP, Shell, Mitsubishi/Mitsui and the China National Offshore Oil Corporation.
Woodside Petroleum Ltd is the operator of the project.
Title/lease
The venture holds nine production licences issued by the Commonwealth of Australia, of which six expire in 2022 and three expire five years after the end of production.
Facilities
Production from the North Rankin and Perseus fields is currently processed through the North Rankin A platform, which has the capacity to produce 2,300 MMcf/d of gas and 60 Mbbl/d of condensate.
Production from the Goodwyn and Echo-Yodel fields is processed through the Goodwyn A platform, which has the capacity to produce 1,450 MMcf/d of gas and 110 Mbbl/d of condensate. Four subsea wells in the Perseus field are tied into the Goodwyn A platform.
An onshore gas treatment plant at Withnell Bay has a current capacity to process approximately 600 MMcf/d of gas for the domestic market.
An existing four train LNG plant has the capacity to produce an average rate of 33,000 tonnes of LNG per day.
Name, location and type of asset
North West Shelf - crude oil Approximately 30 kilometres northeast of the North Rankin gas and condensate field, offshore Western Australia, Australia. Crude oil production is from the Wanaea, Cossack, Lambert and Hermes oil fields.
Ownership and operation
We hold a 16.67% working interest in oil production from these fields.The other 83.33% is held by Woodside Energy 33.34%, with BP Developments Australia, Chevron Australia, and Japan Australia LNG (MIMI) each holding 16.67%.
Woodside Petroleum Ltd is the operator of the project.
Title/lease
The venture holds three production licences issued by the Commonwealth of Australia, with expiry dates ranging between 2012 and 2018.
Facilities
The oil is produced to a floating production storage and offloading unit, the Cossack Pioneer, which has a capacity of 140 Mbbl/d and a storage capacity of 1.15 MMbbl of crude oil.
Name, location and type of asset
Griffin Situated in the Carnarvon Basin, 62 kilometres offshore Western Australia, Australia. Comprises the Griffin, Chinook and Scindian offshore oil and gas fields.
Ownership and operation
We hold a 45% interest in the Griffin Venture. The other 55% is held by Mobil Exploration and Producing Australia (35%) and Inpex Alpha (20%).
We are the operator of the field.
Title/lease
The venture holds a production licence issued by the Commonwealth of Australia that expires in 2014. The licence may be renewed for a period covering five years after production ceases.
Facilities
Oil and gas are produced via the Griffin venture, a floating production, storage and offloading facility. We pipe natural gas to shore, where it is delivered directly into a pipeline.
The Griffin venture has an original production design capacity of 80 Mbbl/d of crude oil and 50 MMcf/d of gas.
Name, location and type of asset
Minerva Approximately 10 kilometres offshore in the Otway Basin of Victoria, Australia. Single offshore gas reservoir with two compartments. Gas plant is situated approximately 4 kilometres inland from Port Campbell.
Ownership and operation
We hold a 90% share of the Minerva venture.
The other 10% is held by Santos (BOL) Pty Ltd.
We are the operator of the field.
Title/lease
The venture holds a production licence issued by the Commonwealth of Australia that expires five years after production ceases.
Facilities
The Minerva development consists of two well completions in 60 metres of water. A single flow line transports gas to an onshore gas processing facility with an original production design capacity of 150 TJ/d and 600 bbl/d of condensate.
Name, location and type of asset
Stybarrow Situated in the Exmouth Sub-basin, 30 kilometres offshore Western Australia, Australia. Comprises the Stybarrow and Eskdale oil and gas fields. The Stybarrow project achieved first oil production on 17 November 2007.
Ownership and operation
We own a 50% share of the Stybarrow venture. The other 50% interest is held by Woodside Energy.
We are the operator of the field.
Title/lease
The venture holds a production licence issued by the Commonwealth of Australia that expires five years after production ceases.
Facilities
Oil is produced by the Stybarrow development which comprises of a floating production, storage and offshore loading facility, nine subsea well completions (including five producers, three water injectors and one gas injector) in 850 metres of water.
The Stybarrow facility has a crude oil production and storage capacity of 80 Mbbl/d and 900 Mbbl respectively. Gas production is reinjected into the reservoirs.
Name, location and type of asset
Zamzama Dadu Block, Sindh Province, Pakistan. Onshore gas wells.
Ownership and operation
We hold a 38.5% interest in the joint venture. The other 61.5% is owned by ENI Pakistan (M) Ltd (17.75%), PKP Exploration Ltd (9.375%), PKP Exploration Ltd 2 (9.375%), and Government Holdings (25%).
We are the operator.
Title/lease
20-year development and production lease starting April 2002 from the Government of Pakistan (with an option to extend five years beyond the 20-year term).
Facilities
Zamzama currently consists of five production wells and four process trains, with a total design capacity of 470 MMcf/d of gas and 3,150 bbl/d of condensate.
Americas
Name, location and type of asset
Atlantis (Green Canyon 743) Gulf of Mexico, approximately 200 kilometres offshore of Fourchon, Louisiana, US. Deepwater oil and gas field.
Ownership and operation
We hold a 44% working interest in the joint venture.
The other owner is BP (56%).
BP is the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of a semi-submersible platform permanently moored in 2,155 metres of water.
The facility has nameplate processing capacity of 200 Mbbl/d of oil and 180 MMcf/d of gas.
Production commenced with the commissioning of wells and facilities in October 2007.
Name, location and type of asset
Mad Dog (Green Canyon 782) Gulf of Mexico, approximately 210 kilometres offshore of Fourchon, Louisiana, US. Deepwater oil and gas field.
Ownership and operation
We hold a 23.9% interest in the joint venture.
The other owners are BP (60.5%) and Chevron (15.6%).
BP is the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of an integrated truss spar equipped with facilities for simultaneous production and drilling operations, permanently moored in 1,310 metres of water.
The facility has the capacity to process 100 Mbbl/d of oil and 60 MMcf/d of gas.
Name, location and type of asset
West Cameron 76 Gulf of Mexico, approximately 20 kilometres offshore, Central Louisiana, US. Offshore gas and condensate fields.
Ownership and operation
We hold a 33.76% interest in the joint venture.
The other owners are Eni Petroleum (40%), Merit Management Partners (15%) and Ridgewood Energy Company (11.24%).
We are the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of two conventional gas platforms with a capacity of 120 MMcf/d of gas and 800 bbl/d of condensate.
Name, location and type of asset
Genesis (Green Canyon 205) Gulf of Mexico, approximately 155 kilometres offshore of Fourchon, Louisiana, US. Deepwater oil and gas field.
Ownership and operation
We hold a 4.95% interest in the joint venture.
The other owners are Chevron (56.67%) and ExxonMobil (38.38%).
Chevron is the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of a floating cylindrical hull (spar) moored to the seabed with integrated drilling facilities and a capacity of 55 Mbbl/d of oil and 72 MMcf/d of gas.
Name, location and type of asset
Starlifter (West Cameron 77) Gulf of Mexico, approximately 25 kilometres offshore, Central Louisiana, US. Offshore gas and condensate field.
Ownership and operation
We hold a 30.95% interest in the joint venture.
The other owners are McMoRan (33.75%), Seneca Resources (11.25%) Merit Management Partners (13.75%) and Ridgewood Energy Company (10.3%).
During the year Newfield Exploration sold its interest to McMoRan and tendered its resignation as operator.
Following approval by the Minerals Management Service in February 2008, we took over as successor operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of a single conventional gas platform with a capacity of 40 MMcf/d of gas and 450 bbl/d of condensate.
Name, location and type of asset
Mustang (West Cameron 77) Gulf of Mexico, approximately 25 kilometres offshore, Central Louisiana, US. Offshore gas and condensate field.
Ownership and operation
We hold a 43.66% interest in the joint venture.
The other owners are Eni Petroleum (22.4%), Merit Management Partners (19.4%) and Ridgewood Energy Company (14.54%).
We are the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The production facility consists of a single conventional gas platform with a capacity of 40 MMcf/d of gas and 450 bbl/d of condensate.
Name, location and type of asset
Neptune Gulf of Mexico, approximately 193 kilometres off the Louisiana coastline Deepwater oil and gas field
Ownership and operation
We hold a 35% interest in the joint venture.
The other owners are Marathon Oil (30%), Woodside Energy (20%) and Maxus US Exploration (15%).
We are the operator.
Title/lease
The venture holds a lease from the US as long as oil and gas are produced in paying quantities.
Facilities
The project constructed a stand-alone tension-leg platform with a nominal capacity of 50 Mbbl/d of oil and 50 MMcf/d of gas. First oil was achieved on 6 July 2008 and nominal production capacity of 50Mbbl/d was achieved during the same month.
Name, location and type of asset
Greater Angostura Approximately 40 kilometres off the east coast of Trinidad. Shallow water oil and gas field.
Ownership and operation
We hold a 45% interest in the joint venture.
The other 55% is held by Total (30%) and Talisman Energy (25%).
We are the operator.
Title/lease
The venture has entered into a production sharing contract with the Republic of Trinidad and Tobago that entitles the contractor to operate Angostura until 2021.
Facilities
The Angostura development is an integrated oil and gas development. The infrastructure consists of a steel jacketed central processing platform with three satellite wellhead protector platforms and flow lines. A pipeline connects the processing platform to storage facilities at Guayaguayare, where an export pipeline has been installed to allow for offloading to tankers in Guayaguayare Bay.
The facility has the capacity to process 100 Mbbl/d of oil.
Europe/Africa/Middle East
Name, location and type of asset
Liverpool Bay Douglas and Douglas West oil fields, Hamilton, Hamilton North and Hamilton East gas fields, and Lennox oil and gas fields in the Irish Sea, approximately 10 kilometres off the northwest coast of England.
Ownership and operation
We hold a 46.1% interest in the joint venture. The other 53.9% is held by Eni.
We are the operator.
Title/lease
The joint venture holds three production licences issued by the Crown of the United Kingdom. One of these licences was extended in July 2007 for a further term which expires in 2025. The other licences expire in 2009 and 2016.
Facilities
The Liverpool Bay asset is an integrated development of six fields.
Oil from the Lennox and Douglas fields is treated at the Douglas complex and piped 17 kilometres to an oil storage barge for export by tankers.
Gas from the Hamilton, Hamilton North, Hamilton East and Lennox fields is initially processed at the Douglas complex then piped by subsea pipeline to the Point of Ayr gas terminal for further processing. The facility has the capacity to produce 308 MMcf/d of gas and 70 Mbbl/d of oil and condensate.
Name, location and type of asset
Bruce/Keith North Sea, approximately 380 kilometres northeast offshore of Aberdeen, Scotland. The Keith field is located adjacent to the Bruce field. Offshore oil and gas fields
Ownership and operation
We hold a 16% interest in the Bruce field. The other 84% is owned by BP (37%), Total (43.25%) and Marubeni (3.75%).
BP is the operator of Bruce.
We hold a 31.83% interest in the Keith field. The other 68.17% is owned by BP (34.84%), Total (25%) and Marubeni (8.33%).
We are the operator of Keith.
Title/lease
The joint venture holds three production licences issued by the Crown of the United Kingdom, which expire in 2011, 2015 and 2018.
Facilities
Production is via an integrated oil and gas platform.
The throughput of the Bruce facility has, since 2002, been increased to 920 MMcf/d through de-bottlenecking and revising operating envelopes.
The Keith field was developed as a tie-back to the Bruce platform facilities.
Name, location and type of asset
Ohanet Approximately 1,300 kilometres southeast of Algiers, Algeria. Four wet gas fields
Ownership and operation
We have an effective 45% interest in the Ohanet joint venture. The other 55% is held by Japan Ohanet Oil and Gas Co. Ltd. (30%), Woodside Energy (Algeria) Pty. Ltd. (15%) and Petrofac Energy Developments (Ohanet) LLC (10%).
The project is operated by a Sonatrach/BHP Billiton staffed organisation.
Title/lease
The venture is party to a risk service contract with the title holder Sonatrach that expires in 2011, with an option to extend under certain conditions.
Under this contract, the Ohanet joint venture is reimbursed and remunerated for its investments in liquids.
Facilities
Production is via an integrated oil and gas platform.
Ohanet is a wet gas (LPG and condensate) development consisting of four gas and condensate reservoirs and a gas processing plant with the capacity to treat 20 MMcf/d of wet gas and 61 Mbbl/d of associated liquids (LPG and condensate).
Name, location and type of asset
ROD Integrated Development Berkine Basin, 900 kilometres southeast of Algiers, Algeria. Six oil fields
Ownership and operation
We hold a 45% interest in the 401a/402a production sharing contract, with ENI holding the remaining 55%.
We have an effective 38% interest in ROD unitised integrated development. ENI owns the remaining 62%. This interest is subject to a contractual determination to ensure that interest from participating association leases is accurately reflected. Future redetermination may be possible under certain conditions.
A joint Sonatrach/ENI entity is the operator.
Title/lease
The venture is party to a production sharing contract with the title holder Sonatrach that expires in 2016, with an option for two five-year extensions under certain conditions.
Facilities
Comprises the development and production of six oil fields, the largest two of which, ROD and SFNE, extend into the neighbouring blocks 403a and 403d.
The ROD Integrated Development is being produced through a dedicated processing train located adjacent to BRN processing facilities on block 403, with the capacity to process approximately 80 Mbbl/d of oil.
Development projects
Australia/Asia
North West Shelf Train 5 expansion
The expansion of the existing LNG processing facilities located on the Burrup Peninsula continues with the construction of the fifth LNG train. In June 2005, our Board approved our 16.67 per cent share of investment in a fifth LNG train expansion of the existing LNG processing facilities located on the Burrup Peninsula, which will increase total LNG production capacity to 43,500 tonnes per day. Our share of development costs, based on the operator’s estimate, is approximately US$350 million, with first production expected by end of first quarter FY2009.
North West Shelf Angel development
Development of the Angel gas and condensate field, approved in December 2005 is nearing completion. The development includes the installation of the venture’s third major offshore production platform, which will have a capacity to produce 800 MMcf/d of gas and 50 Mbbl of condensate per day from the North West Shelf and associated infrastructure, including a new subsea 50 kilometre pipeline, that will be tied in to the first trunk line at the North Rankin platform. Our 16.67 per cent share of development costs, based on the operator’s estimate, is approximately US$200 million. The project is on schedule and budget with first production expected by end of 2008.
North West Shelf North Rankin gas compression project
In March 2008, the Board approved the North West Shelf gas compression project to recover remaining lower pressure gas from the North Rankin and Perseus gas fields. A new gas compression platform, North Rankin B (NRB), capable of producing 2,500 MMcf/d of gas will be constructed adjacent to the existing North Rankin A platform, 135 kilometres offshore from Karratha on the northwest coast of Western Australia. The two platforms will be connected by a 100 metre bridge and operate as a single facility. Our 16.67 per cent share of development costs is approximately US$850 million. First gas is expected in 2012.
Pyrenees — WA-12-R/WA-155-P
In July 2007, the Board approved the Pyrenees project to develop the WA-12-R permit portion of the Crosby, Stickle and Ravensworth oil fields in the Exmouth Sub-basin, off the northwest coast of Western Australia. Project costs for the WA-12-R permit portion of the Pyrenees development are approximately US$1.7 billion (approximately US$1.2 billion our share). The WA-155-P permit portion of the Pyrenees project was approved by the Board in November 2007, incorporating the remainder of the Ravensworth field as it straddles both WA-12-R and WA-155-P permits. The combined development consists of subsea production and injection wells tied back to a floating production storage and offloading (FPSO) facility with an oil processing capacity of 96 Mbbl/d. First production is expected during the second half of FY2010.
We own a 71.43 per cent operated interest in the WA-12-R permit, with Apache Energy Ltd owning the remaining 28.57 per cent. We own a 40 per cent operated interest in the WA-155-P permit, with Apache Energy Ltd owning 31.5 per cent and Inpex owning 28.5 per cent.
Bass Strait Kipper gas field development
Initial development of the Kipper gas field in the Gippsland Basin located offshore Victoria was approved by the Board in December 2007. The first phase of the project includes two new subsea wells, three new pipelines and platform modifications to supply 10 Mbbl/d of condensate and 80 MMcf/d of gas. Gas and liquids will be processed via the existing Gippsland Joint Venture facilities. Our share of development costs, based on the operator’s estimate, is approximately US$500 million. First production is expected in 2011.
We own a 32.5 per cent interest in the Kipper Unit Joint Venture, with Esso Australia and Santos owning the remaining 67.5 per cent. We own a 50 per cent interest in the Gippsland Joint Venture.
Bass Strait Turrum field development
Further expansion of the Gippsland Basin facilities is underway with the Board approving the full field development of the Turrum oil and gas field in July 2008. Our 50 per cent share of the investment, based on the operator’s estimate, is approximately US$625 million and consists of a new platform, Marlin B, linked by a bridge to the existing Marlin A platform. The Turrum field, which will supply 10 Mbbl/d of oil and 200 MMcf/d of gas, is located 42 kilometres from shore in approximately 60 metres of water. First production is expected in 2011.
Scarborough
We have a 50 per cent non-operated interest in the Scarborough gas field in WA-1-R (ExxonMobil holds the remaining 50 per cent and is the operator). We are still examining a number of concepts for field development.
United States
Shenzi/Genghis Khan
We have a 44 per cent interest, and will operate the Shenzi oil and gas project in the deepwater fields of Gulf of Mexico. Other owners of the project are Repsol (28 per cent) and Hess Corporation (28 per cent). The project is constructing a stand-alone tension-leg platform (TLP) with a nominal design capacity of 100 Mbbl/d and 50 MMcf/d of gas. The hull and topsides were installed in July 2008. Installation of subsea equipment and development drilling and completion of wells continues per the approved program. First oil through the Shenzi TLP for the Shenzi Development is expected by the end of FY2009.
The Genghis Khan field is part of the same geological structure as the Shenzi project. As with Shenzi, we are the operator of Genghis Khan and hold a 44 per cent interest. Co-venturers are Hess Corporation and Repsol YPF, each with 28 per cent. The Genghis Khan development consists of a 3,841 metres tie-back to the existing Marco Polo TLP, which is owned in a joint venture by Enterprise and Helix, and is operated by Anadarko. First oil through Marco Polo occurred in October 2007. Gross costs for the Shenzi/Genghis Khan field development (net of acquisition costs) are US$4.9 billion (US$2.2 billion our share).
Exploration and appraisal
We are focused on finding significant discoveries through wildcat drilling. We have exploration interests throughout the world, particularly the Gulf of Mexico, Western Australia, Latin America and Malaysia. During the year, our gross expenditure on exploration was US$692 million. Our major exploration interests are as follows:
Australia/Asia
Thebe
The Thebe-1 exploration well was drilled in July 2007 and is located approximately 300 kilometres off the northwest coast of Western Australia in water depths of 1,173 metres and approximately 50 kilometres north of the Scarborough gas field. The well and subsequent evaluation confirmed a gas column encountered in the Exmouth Plateau of the Carnarvon Basin.
Thebe-2 Appraisal well was drilled in February 2008 to a depth of 2,550 metres to appraise the reservoir discovered by Thebe-1. The results confirmed the presence of a high quality reservoir. Both wells have been plugged and abandoned while further appraisal options are evaluated.
BHP Billiton is the operator of Thebe-1 and Thebe-2 and holds a 100 per cent interest in the field.
Browse
The Browse basin is comprised of the Torosa, Brecknock and Calliance fields and is operated by Woodside Petroleum. It is divided into two joint ventures: East Browse and West Browse. We have an 8.33 per cent non-operated interest in East Browse and a 20 per cent non-operated interest in West Browse. An appraisal program is in progress and concurrently the operator is evaluating options for field development through engineering and site selection studies.
Malaysia
In March 2007, we were awarded two offshore blocks in Malaysia. We are the operator of the blocks under two separate Production Sharing Contracts. The minimum exploration program includes the acquisition and processing of seismic data for approximately 2,300 square kilometres across the two blocks, and the drilling of four exploration wells within the first seven years of the contracts. The initial seismic acquisition program commenced in June 2008.
Americas — Gulf of Mexico
Puma — Green Canyon/Western Atwater Foldbelt exploration
The Puma-1 exploration well was drilled in January 2004. The well was drilled in 1,259 metres of water and encountered hydrocarbons in both the original hole and in two subsequent sidetrack bores. The first appraisal well was re-entered in January 2007 but did not encounter any commercial reserves and has been temporarily abandoned. A second appraisal well drilled in March 2007 also did not discover commercial reserves. An additional appraisal well is planned in FY2009 to further evaluate the Puma prospect.
Following an interim equity agreement, we hold a 29.8 per cent interest in Puma. The other 70.2 per cent is held by BP (46.2 per cent), Chevron (21.75 per cent) and Statoil (2.25 per cent), subject to future redetermination.
Knotty Head — Green Canyon/Wester Atwater Foldbelt exploration
We currently own a 25 per cent interest in an exploration well on the Knotty Head Prospect, located in the Green Canyon area. Partners in the well are Nexen (25 per cent owner and operator), Anadarko (25 per cent) and Unocal (a wholly-owned subsidiary of Chevron (25 per cent)). Unocal spudded the exploration well in March 2005. The initial well was completed in mid-December 2005 followed by a sidetrack operation that was completed in early March 2006 to further evaluate the results of the discovery well. The well was drilled in 1,088 metres of water to a total depth of 10,422 metres and encountered hydrocarbons in both the original hole and the subsequent sidetrack. Additional appraisal work to further evaluate the economic potential of the prospect is in progress.
Americas — Colombia
In June 2007, we signed a Joint Operating Agreement with Ecopetrol for the Fuerte Norte and Fuerte Sur blocks, located offshore in Colombia. We hold 75 per cent operated interest in each block with Ecopetrol holding the remaining 25 per cent. In October 2007 the Joint Venture entered into the second phase of the Exploration and Production Licences for the two Fuerte Blocks and subsequently undertook acquisition and processing of 3D seismic over the area.
Americas — Falkland Islands
In December 2007, we farmed into Northern and Southern area licences offshore of the Falkland Islands. We acquired a 51 per cent interest from our joint venture partner Falkland Oil and Gas Limited (FOGL) and assumed operatorship in January 2008. The minimum exploration work program includes the drilling of two wells in the first phase by the end of 2010.
Europe/Africa/Middle East
Namibia
We hold interests in two blocks located offshore in Namibia, known as the Northern and Southern Block, which we acquired in 2005. In November 2006, we farmed out a 25 per cent interest in these two blocks. Mitsui & Co Ltd acquired 15 per cent and the Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd acquired 10 per cent with an option to consider additional equity. We remain the operator and hold the remaining 75 per cent interest.