Woodside Plans New LNG Project in Western Australia (Update5) Listen
bloomberg.com
Aug. 8 (Bloomberg) -- Woodside Petroleum Ltd., Australia's second-largest oil and gas company, plans to spend ``several billion dollars'' on a new liquefied natural gas project to tap demand in Asia and North America. Its shares rose to a record.
A final decision to build the plant, which Morgan Stanley estimates may cost at least A$5 billion ($3.8 billion), is planned for mid-2007, Perth-based Woodside said today. Deliveries from the project in Western Australia, which will use gas from Woodside's offshore Pluto field, could start in late 2010.
Chief Executive Don Voelte, who joined Woodside in 2004, said in April he was considering plans for the early development of Pluto. Woodside owns one-sixth of the A$14 billion North West Shelf venture, Australia's only producing LNG project, and is also seeking customers for its Browse LNG project.
``Don has been very bullish about LNG since he took over the reins,'' said Jodie Phillips, an oil and gas analyst at Macquarie Equities Ltd. in Sydney. ``I do wonder whether they would maintain 100 percent equity. What they could look at doing is, whoever is the purchaser of the LNG taking'' a stake in the project, she said.
Shares in Woodside, which is 34 percent-owned by Royal Dutch Shell Plc, had their biggest one-day gain in more than two years, rising A$1.53, or 5 percent, to a record close of A$31.92. Other Australian oil stocks also rose as crude-oil futures reached a record in New York.
Cooled
The North West Shelf venture, operated by Woodside, in June approved a A$2 billion investment to build a fifth LNG production line at Karratha, a 4.2 million tons-a-year unit that is due for completion in 2008.
LNG is natural gas cooled to liquid form for transportation by tanker to destinations not connected by pipeline. On arrival, it is turned back into gas form for supply by pipeline to users such as power stations.
Emerging demand for LNG in India, China and the west coast of North America, and supply difficulties in Indonesia are expected to keep the Asia-Pacific LNG market ``tight'' in the next few years even as new projects start up, the Australian Bureau of Agricultural and Resource Economics said in June.
The Woodside-operated North West Shelf venture supplies LNG to Japan and South Korea and is due to start exports to China by mid-2006. ConocoPhillips is due to start delivering LNG from a $1 billion LNG plant in Darwin to Japanese customers early next year, while Chevron Corp. is planning a A$11 billion project to develop the Gorgon gas fields off Western Australia for LNG supply to North America and Asia starting in 2010.
Demand Window
LNG from Pluto is intended to fill a ``strong LNG demand window opening between 2010 and 2012 in the Asia-Pacific and North America,'' Woodside said in a statement, which was lodged with the exchange. ``Substantive progress'' on LNG sales agreements for Pluto gas are expected by the end of the year, it said.
About half of the LNG from Pluto is likely to be sold to existing established LNG customers under longer-term contracts, with the rest to customers in newer markets including North America, Voelte said in a teleconference.
``In all of this the critical thing first is the gas customer or customers, and if they get that there's a reasonable amount of certainty, they've probably got the basis for a project,'' said Stuart Baker, a Melbourne-based energy analyst at Morgan Stanley. ``What they've said suggests to me they must have a new market opportunity here that isn't going to conflict with their North West Shelf position.''
Cnooc
The cost of the project, including the offshore field development, pipelines and onshore gas processing plant, may be at least A$5 billion, Baker said.
The Pluto project may attract interest from gas importers such as China National Offshore Oil Corp., which may take a stake in the project as part of an LNG purchasing agreement, said Len Eldridge, an energy analyst at Commonwealth Securities Ltd. in Melbourne. China National has been in talks to buy gas from Chevron's rival Gorgon project, while its Cnooc Ltd. unit is negotiating to buy a stake in the project.
``This is a project that seems perfectly set up if a Chinese company wanted to get a stake, it could buy into Pluto,'' Eldridge said. ``If Woodside set up their own LNG plant in Karratha, they could feed Browse gas through there as well. For a Chinese company like Cnooc that would be pretty attractive.''
Pluto, which Woodside discovered in April, lies about 190 kilometers north-west of Karratha. Gas would be produced at an offshore platform and piped ashore to one or two LNG processing units. The onshore plant may be built at any of four possible locations, including one adjacent to the North West Shelf venture's plant, Woodside said.
Regional Hub?
Woodside estimates that the Pluto field may hold at least 3.5 trillion cubic feet of gas, Voelte said. The plant may also process gas from other companies, he said.
``We are now confident that we have sufficient gas to justify an LNG plant with a capacity of five-to-seven million (metric) tons a year,'' Voelte said in today's statement. ``The onshore plant will initially be supplied from the Pluto field but could also cater for other Woodside regional gas,'' he said.
Voelte said in April Woodside was considering a number of options for Pluto in addition to a stand-alone development. Those include a possible venture with Chevron Corp. to combine the field with Chevron's nearby Wheatstone discovery, or using gas from Pluto to feed a further expansion of the North West Shelf, Goldman Sachs JBWere Pty said in a July 20 report.
Initial engineering work is due to start in November and Woodside has budgeted A$65 million of spending this year for development studies, marketing and drilling two appraisal wells.
LNG imports in the Asia and Pacific region rose 6 percent last year to an estimated 88 million metric tons and may almost double in the next 10 years, the Australian government's commodities forecaster said.
To contact the reporter on this story:
Angela Macdonald-Smith in Sydney at amacdonaldsm@Bloomberg.net.
Last Updated: August 8, 2005 03:47 EDT |
