Serious cracks have emerged in Australian LNG's appetite for greenfield projects after Santos and French partner GDF Suez baulked at pushing ahead with the Bonaparte floating LNG development in the Timor Sea.
Although Santos insisted yesterday that FLNG remained an option for Bonaparte, it said the partners had decided against front-end engineering and design work because pre-FEED studies had indicated a project that "does not currently meet the companies' commercial requirements".
Instead, the partners are focusing on brownfield options, with a pipeline linking the Petrel, Tern and Frigate gas fields with ConocoPhillips' Darwin LNG or Inpex's under-construction Ichthys plant (also in Darwin) the likely development options.
Santos is a partner in Darwin LNG - the feed gas from Bayu-Undan fields is running out - and involved in non-Ichthys joint ventures with Inpex, though either brownfield option will require a high level of collaboration in an industry known for its fierce rivalry.
Yesterday's Bonaparte surprise is likely to be interpreted as first evidence Australian LNG proponents are paying the price for a decade of relentless investment in big-ticket greenfield operations. In all cases, there have been big cost blowouts often accompanied by schedule delays.
Even though the flurry of construction activity will elevate Australia to near the top of global LNG production, it has come at a reputational cost and has prompted investors to demand more financial discipline.
The Bonaparte fields contain an estimated two to three trillion cubic feet of dry gas.
John Anderson, Santos' vice-president for Asia, WA and the Northern Territory, said yesterday the decision to again focus on a pipeline development did not mean the Bonaparte partners had concerns about FLNG.
"We saw FLNG as technically robust," he said. "It was purely driven by the economics and then at the same time some of the alternatives came to light."
Mr Anderson would not reveal his preferred development option but highlighted the potential for Bonaparte gas to be used as backfill or expansion of one-train Darwin LNG, or for a possible eventual expansion of two-train Ichthys.
Mr Anderson said the Bonaparte partners would be "getting on with looking at these alternatives with some pace".
"I do have optimism that we will see a new chapter of collaboration where fields genuinely come together and make a bigger economic pie and bring a project forward," he said.
"I think there is a growing sentiment and recognition that we have to move on with deep-sea collaboration."
GDF paid Santos $US200 million in 2009 and committed to funding all of the pre-FEED and FEED work in return for a 60 per cent stake in Bonaparte.