Australia’s largest independent oil company Woodside Petroleum merges with BHP’s oil and gas operations, and decides on a large LNG project outside Western Australia.
The LNG plant Pluto
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Woodside has made an investment decision on the development of the Scarborough field and a second production train at the Pluto liquefied natural gas (LNG) plant in the state of Western Australia for $ 12 billion (close to NOK 107 billion).
At the same time, Woodside also reports that it should merge with BHP’s oil and gas operations.
The Scarborough field will be developed with a floating production unit (FPU), and eight wells will be drilled in the first phase and a total of 13 wells. The gas will be transported to Pluto near the city of Karratha through a 430-kilometer pipeline. BHP is a former co-owner in Scarborough with 26.5 percent, while Woodside owns 73.5 percent.
“Scarborough will be a significant contributor to Woodside’s cash flow, financing of future developments and new energy products, and return to shareholders,” said Woodside CEO Meg O’Neill.
The gas from Scarborough processed through train two on Pluto will be one of the LNG sources with the lowest carbon intensity to customers in North Asia, and the first LNG load will go in 2026, the company writes in a Message. The LNG plant Pluto delivered its first cargo in 2012, and the existing plant (train 1) will also be upgraded.
Last week reported Woodside that the company sold 49 percent of Pluto 2 to Global Infrastructure Partners.
Repaid in six years
The Scarborough Field is located 375 kilometers off the coast of Western Australia. Contracts have been entered into for the purchase of around 60 per cent of the gas, including from the urea project Peace, states Woodside.
– Scarborough and train two on Pluto are not only the first decision on new LNG infrastructure in 10 years (since Inpex went ahead with Ichthys), but also the largest single investment in upstream operations in Australia in the last decade, says Wood Mackenzie analyst Daniel Toleman in a comment.
Woodside believes the project will be repaid in just six years, which will be a significant improvement from previous projects, according to Wood Mackenzie.
“Woodside is aware of Australia’s deplorable history in the delivery of LNG projects, and has wisely focused on reducing the risk of cost overruns,” said Toleman.
Can get more partners
The decision on the developments comes at a time of record high gas prices, and prices are expected to remain strong until 2026, according to Wood Mackenzie.
But there is also a risk that the project will start in the middle of a new wave of increasing LNG supply, with Qatar at the forefront, analysts believe.
– But for Woodside, Scarborough and train two of Pluto is a project that builds the company. It will provide over 20 years of strong cash flow, and lock in production growth until after 2030. The next thing is about participation. After taking in a partner on Pluto train two, will the company do the same with Scarborough? Toleman asks.
Merger of Woodside and BHP’s oil and gas operationsWoodside makes investment decisions on Scarborough and Pluto 2Sells 49 percent of Pluto 2 to Global Infrastructure Partners–
