BHP Billiton Discovers Natural Gas Offshore Western Australia

BHP Billiton Ltd. (BHP.AU) said Wednesday a natural gas discovery offshore Western Australia state could significantly increase the size of its Scarborough gas field, enhancing its appeal as a potential supply source for gas export facilities under construction on the coast.

BHP said it encountered hydrocarbons at the North Scarborough appraisal well, but didn't detail the size of the find.

"Drilling and logging of the North Scarborough appraisal well proves a significant extension to the Scarborough gas resource," a BHP Billiton spokesman said.

"Commercialisation options are being evaluated. We are unable to comment further on potential development options," he added.

BHP wholly owns North Scarborough, located near one of the company's biggest gas discoveries in recent years, held in a joint venture with ExxonMobil Corp. (XOM).

While international oil companies are racing to build gas-export facilities to take advantage of a surge in demand for cleaner-burning fuels from Asia, BHP and Exxon have yet to commit to a development plan for Scarborough and another BHP gas discovery, known as Thebe, to the north.

Options available to BHP and Exxon include building a standalone liquefied natural gas terminal on the coastline or processing the gas through separate terminals being built by Chevron Corp. (CVX) and Woodside Petroleum Ltd. (WPL.AU).

In a presentation accompanying its first-half results, BHP flagged that its share of the cost of developing Scarborough at more than US$5 billion. It also said developing Thebe would cost it between US$501 million and US$5 billion.

BHP also operates and owns 55% of the Tallaganda-1 well offshore Western Australia. It said Wednesday the well had encountered hydrocarbons, but a joint venture partner in the well questioned the quality of the discovery.

"A full suite of wireline log data and core has been collected and it currently being evaluated," the BHP spokesman said.

"We have confirmed a gross hydrocarbon interval of 245 meters and 86 meters net pay in the well. Further evaluation of available data and appraisal activities are required to determine commerciality."

Tap Oil Ltd. (TAP.AU), which owns 20% of the well, said the "reservoir quality over the gas bearing interval penetrated in the well is variable".

By 0413 GMT, Tap shares were down 8.5% at 80.5 cents, having fallen as low as 76.5 cents.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com

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