March 12, 2002
The Tokyo Electric Power Company, Incorporated
Tokyo Gas Co., Ltd.
The Tokyo Electric Power Company, Incorporated (TEPCO) and Tokyo Gas Co., Ltd.
(Tokyo Gas) hereby announce that they have decided to participate in the Bayu-Undan
project, an upstream project in the Joint Petroleum Development Area of East Timor and
Australia that is being led by Phillips Petroleum Company of the United States of America.
Accordingly, today, TEPCO and Tokyo Gas, in the ratio of two to one, have concluded a
share sales and purchase agreement with Phillips to acquire the shares of Phillips
Petroleum Timor Sea Inc. (PPTSI), which owns 10.08% of the interests in the Bayu-Undan
field. PPTSI is one of the four Phillips Group affiliated companies holding the interests in
the field. The actual share acquisition requires formal approval of this project by the
governments of East Timor and Australia and is scheduled for the third quarter of this year.
At the same time, TEPCO and Tokyo Gas have signed a Heads of Agreement for LNG
Sales and Purchase with Darwin LNG Pty Ltd, an Australian company established by
Phillips for the construction and operation of a gas liquefaction plant and the sales of LNG
(liquefied natural gas). Feed gas for the LNG will be sourced from the Bayu-Undan field.
The agreement includes the procurement, covering a 17-year period from 2006, of two
million tons per year by TEPCO and one million tons per year by Tokyo Gas of LNG for a
total of three million tons per year of LNG produced by Darwin LNG Pty Ltd.
The Bayu-Undan field is located 500 kilometers offshore from Darwin, Australia, and 250
kilometers off the south coast of East Timor. In addition to 3.4 trillion cubic feet of natural
gas (equivalent of approx. 80 million tons of LNG), the field has reserves of about 400
million barrels of condensate and LPG. The condensate and LPG are to be shipped from a
floating facility for sale to the Asian market from 2004. The plan for the development of
natural gas calls for a pipeline to be laid on the sea floor from the gas field to Darwin,
Australia and a gas liquefaction plant is to be built on the outskirts of Darwin to produce
LNG to be shipped to TEPCO and Tokyo Gas from 2006.
Construction of the facilities needed at the field for producing and shipping condensate and
LPG has already commenced since 2000, and construction of the pipeline and LNG plant
is anticipated to be finally decided for the third quarter of this year. The total construction
cost, including pipeline and LNG plant, is expected to be about US$ 3 billion.
This project is expected to yield a good return with the purchase of three million tons of
LNG per year by TEPCO and Tokyo Gas commencing 2006 and with income from
producing condensate and LPG commencing 2004.
Through this participation, TEPCO and Tokyo Gas will have a direct involvement in the
development of a source of gas for fuel and city gas feedstocks. Moreover, their acquisition
of the right to participate in the pipeline and plant projects, combined with the LNG
transportation business using their own LNG ships, will enable both companies to
participate in the whole LNG chain: gas production, pipeline transportation, liquefaction,
marketing, shipping and consumption of LNG in the power generation and the gas
distribution. They believe the participation in the whole LNG business chain will secure
them a stable and economic supply of the fuel and city gas feedstocks.
The close and reliable relationship cultivated with Phillips for more than 30 years since
1969, when TEPCO and Tokyo Gas became the first Asian importers of LNG from Alaska,
has provided the foundation to discuss this participation and LNG procurement, and has
led to the current agreement. TEPCO and Tokyo Gas, together with Phillips, will further
strengthen the mutual cooperation for the success of this project to create a new paradigm
for LNG.
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