Woodside Looks for Headway on Stalled Browse LNG Project

Published August 16, 2017
Dow Jones Newswires

MELBOURNE, Australia--Woodside Petroleum Ltd. could put its stalled Browse gas-export project back on the drawing board later this year as it looks to an anticipated market shortfall of liquefied natural gas in the years ahead.

The Australian oil-and-gas producer is considering options to leverage existing infrastructure in Australia's far west, bringing in natural-gas from new offshore fields. That includes targeting a fresh development plan for Browse by the end of the year and pushing ahead with studies to possibly expand its Pluto operation.

Woodside and its partners shelved plans in early 2016 for a floating vessel that would draw in and process gas because they couldn't drive production costs low enough amid a slump in oil prices. The project had already been delayed several times and the plans altered from earlier onshore concepts.

Australia has been an epicenter of LNG development in recent years, with more than US$200 billion committed to vast projects to chill and ship natural gas, setting it up to overtake Qatar as the world's leading LNG exporter.

Last month, Malaysia's state-owned Petroliam Nasional Bhd., or Petronas, blamed prolonged low gas prices for scrapping a multi billion-dollar plan to build the Pacific NorthWest LNG project on Canada's west coast. The same month, Qatar Petroleum said it planned to increase LNG supplies by 30% over the next seven years, doubling the size of a major project in a massive subsea Persian Gulf gas field shared with Iran.

"Only the lowest-cost supply will get into the market," Woodside Chief Executive Peter Coleman said in an interview Wednesday, after the energy company reported a jump in its first-half profit.

While new "mega greenfield" projects need to be underpinned by longer-term supply contracts, developments that are built around existing liquefaction operations have a cost and risk advantage.

Mr. Coleman said the company's "brownfield" projects could be ready for a final investment decision from late 2019, the early part of a prospective window if supply is to be ready to meet a forecast market shortfall. Although global supply has surged in recent years, LNG demand has continued to grow and supply has been absorbed by existing buyers in Japan, Korea and China as well as newer users, including India, he said.

The preferred option for Browse would be to run its gas through the established North West Shelf operation and gas from the Scarborough field, also off Western Australia, through Pluto, Mr. Coleman told investors during a post-results briefing. Venture partners in Browse have agreed to using North West Shelf as the reference for any development, although agreement would depend on terms and conditions, he said.

The Browse project sits on an estimated resource of 15.4 trillion cubic feet of dry gas, plus 453 million barrels of condensate, in a basin about 425 kilometers north of Broome in Western Australia. Woodside and partners in late 2013 decided to push ahead with unproven floating technology and undersea development to produce LNG and in mid-2015 agreed on the front-end engineering and design phase of the project.

Woodside has an almost 31% stake in the Browse venture, while Royal Dutch Shell PLC has a 27% interest and BP PLC a little over 17%. The other partners include Japan Australia LNG and PetroChina Co.

Woodside has tipped a modest slide in production this year before it climbs about 15% through 2020, driven by the start-up of the US$34 billion Wheatstone LNG project being developed by Chevron Corp. and its own Greater Enfield oil project. The company also is positioning to boost its LNG capacity in the coming years, increase output at its Pluto LNG plant and potentially use its facilities as a hub for undeveloped gas fields in the region.

On Wednesday, Woodside said its half-year net profit climbed 49%, lifted by a recovery in oil and liquefied natural gas prices and reduction in costs. Profit was US$507 million in the six months through June, after sliding in line with crude-oil prices a year ago to US$340 million.

With the rise, the Perth-based energy company said it would pay an interim dividend of US$0.49 a shares, a 44% increase on last year.

Late last month, the company reported a 3.6% dip in half-year operating revenue to US$1.87 billion from US$1.94 billion, as sales volumes fell by a little over 9% on-year. However, the average price realized for its products was 10% higher for the period.

The company derives most of its earnings from LNG through output from the North West Shelf project, which has been operating since 1984, and Pluto which began producing in 2012. Much of the output is secured by long-term supply contracts, which tend to be priced against oil.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 16, 2017 00:11 ET (04:11 GMT)