08-03-01 Phillips Petroleum Company is stepping up its efforts to bring Timor Sea gas to market ahead of schedule through a letter of intent with El Paso Corporation which contemplates development of a major LNG project that would deliver approximately 4.8 mm tpy of LNG to growing gas markets in Southern California and Mexico's Baja California peninsula.
Subsidiaries of the two companies have signed a letter of intent (LOI) for the long-term purchase by El Paso of LNG from a plant to be built by Phillips near Darwin, Australia. A definitive agreement, expected to be finalized by mid-year, provides for LNG sales to El Paso beginning in 2005.
The LNG would be shipped to North America, where it would be regasified and sold as approximately 680 mm cfpd of natural gas. This would foster electric power, commercial and industrial development in Mexico's Baja California peninsula and provide a new source of natural gas supplies in growing Southern California markets. El Paso would be responsible for marketing the natural gas.
Phillips and El Paso also are working jointly to develop LNG shipping and a new LNG receiving terminal on the West Coast of North America that will receive, store and re-gasify the LNG. The companies are working with Mexican and U.S. authorities to establish the site of the new terminal and acquire regulatory permits. The new terminal will be scheduled to begin providing service in 2005.
The companies would use existing pipelines to transport the natural gas from the terminal to customers.
The Darwin LNG facility, which is planned to be built using Phillips' Optimised Cascade LNG Process, will be supplied with gas from the Greater Sunrise fields in the Timor Sea. These fields contain gas reserves of approximately 9 tcf.

This project, along with Phillips' cooperative development agreements with Shell and Woodside, will enable the company to commercialise net hydrocarbon reserves of up to an additional 760 mm barrels of oil equivalent from Bayu-Undan and the Greater Sunrise fields. This is in addition to 186 mm barrels of net condensate reserves already under development at Bayu-Undan.
The LOI follows the increase of Phillips' interest in the Greater Sunrise fields to 30 % and finalization with Shell and Woodside of principles for cooperative development of gas resources in the Timor Sea. Gas production from the Woodside-operated Greater Sunrise fields could begin as early as mid-2006. Gas required to satisfy Greater Sunrise deliveries prior to this time will be made available from Phillips-owned equity reserves in Bayu-Undan and possibly other participants in the Bayu-Undan project.
"This LOI with El Paso, combined with the cooperative arrangements with Shell and Woodside, validates Phillips' vision for Timor Sea gas developments and increases the value to all stakeholders in these resources," said Bill Parker, Phillips executive vice president, worldwide production and operations. "With future gas sales to this LNG project -- and to domestic customers in Australia's Northern Territory and elsewhere -- the Timor Sea will become a new center of production for Phillips, commercialising significant quantities of gas and condensate reserves. Further, these developments serve to better balance the company's production of oil and natural gas, and build on Phillips' strategy to grow its exploration and production asset portfolio

Phillips' Optimised Cascade LNG Process is used at a company-operated LNG plant in Kenai, Alaska. In addition, Phillips has interests in LNG shipping and licenses its proprietary LNG manufacturing technology to other users worldwide.

Phillips is an integrated petroleum company with interests around the world. Headquartered in Bartlesville, Okla., the company has 12,400 employees and $ 20.5 bn of assets, and had $ 21.2 bn of revenues in 2000.