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Exxon Makes Final Decision On Australian Gas Project

Exxon has decided to go ahead with the development of the West Barracouta natural gas project off the coast of Australia, which will supply gas to the domestic market, the company said.

West Barracouta is located in the Gippsland Basin, where Exxon already has producing fields, operated in partnership with Australian mining giant BHP Billiton. The joint venture of the two supplies some 40 percent of the natural gas consumed on the Australian East Coast.

The West Barracouta field is part of a larger deposit by the same name and will be tied to the existing production infrastructure in the Bass Strait off the coast of Victoria, Exxon also said. Separately, BHP Billiton said it will invest US$144.4 million in the new project. Recently, the joint venture between Exxon and BHP has spent some US$3.98 (A$5.5 billion) billion on expanding production in the area, all to go to the domestic market.

Not too long ago, Australia, boasting some of the largest gas reserves in the world, found itself in the unusual position of turning into a major gas exporter while suffering shortages on the domestic market.

Last year, the Australian government introduced a Domestic Gas Security Mechanism, allowing it to force LNG exporters to divert certain amounts of the fuel for the domestic market in case of a shortage. The move sparked mixed reactions with some seeing it as a much-needed intervention and others perceiving it as interference on the market.

Meanwhile, the industry itself rushed to secure greater supply for the domestic market. For now, at least in certain parts of Australia, the shortage danger seems to have been avoided. Yet a recent report in The West Australian cited research from the Australian Energy Market Operator that projected a potential shortage of gas for the local market amid lower prices that made otherwise recoverable reserves for local consumption unviable.

By Irina Slav for Oilprice.com

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