Woodside to take control of Gippsland gas, eyes new east coast supply

The energy major will oversee day-to-day operations of the dominant supplier of gas to Australia’s east coast and have the right to pursue and develop new gas fields in the region without Exxon’s involvement.

Woodside Energy has embarked on global expansion through projects such as its Scarborough LNG facility.

Woodside will become a bigger force in east coast oil and gas after reaching a deal with ExxonMobil to take operational control of their Gippsland Basin joint venture – the region’s most important domestic gas source – and potentially develop new supply.

The agreement marks the end of an era for the Bass Strait partnership, with Woodside assuming control from Exxon’s Australian subsidiary, Esso, which has managed the project for decades.

Under the revised structure, Woodside will oversee day-to-day business and have the right to pursue and develop new gas fields without Exxon’s involvement.

The move represents a strategic expansion for the Perth-based energy major and reinforces its ambition to bolster gas supply on the east coast, where acute concerns are shared over the prospect of future shortages. The Australian Energy Market Operator has forecast a structural supply deficit by 2029 unless new sources of fuel are developed.

Woodside has identified around 200 petajoules of potential new gas reserves in the Gippsland Basin, but said further technical work was required and that a final investment decision regarding its development was yet to be made. It would involve four new wells.

Shares in Woodside rose 1.5 per cent to $26.60.

Chief operating officer Liz Westcott said the deal strengthened Woodside’s role in domestic energy supply.

“The transfer of operatorship builds on 40 years of Woodside’s demonstrated offshore and onshore operations capability.

“Under the agreement, Woodside will assume operatorship of the offshore Bass Strait production assets, the Longford Gas Plant, the Long Island Point gas liquids processing facility and associated pipeline infrastructure,” said Ms Westcott.

“Every molecule of natural gas produced in the Bass Strait is sold into the east coast market for local homes, manufacturers, and power generators.”

Woodside said it hopes to complete the transfer of operations in 2026 pending regulatory approvals.

Woodside’s Scarborough energy project.

Any development would need to proceed relatively quickly to address supply pressures ahead of the scheduled closure of the Longford gas plant in 2033.

The Gippsland Basin joint venture, operating since the late 1960s, supplies about 40 per cent of Victoria’s gas and remains a critical contributor to the National Electricity Market. However, output from the basin has been in steady decline, triggering increased pressure from government and industry for new investment.

Woodside has historically been more dominant in Western Australia.

The company has pursued an aggressive growth strategy in recent years, developing major projects and completing acquisitions that have transformed it into one of the world’s top LNG exporters.

Josh Stabler, managing director of energy consultancy company Energy Edge, said the Exxon deal was bold and potentially risky.

“The riskiness is associated with the fact that Longford reached a recent peak in operations during 2022 but declined by 37 per cent by 2024, and the AEMO Victorian Gas Planning Report stating closure of the facility in 2033.

“The boldness will be a test of the well-earned competency of Woodside’s operational teams and their ability to bring gas to the southern gas market in a timely and cost-effective fashion.”

Expanding the company’s domestic footprint through new east coast developments could also help deflect criticism that it has prioritised exports over local supply.

The timing of the deal comes ahead of anticipated reforms to the Australian Domestic Gas Security Mechanism and a new round of heads-of-agreement negotiations between the federal government and east coast LNG producers.

The Albanese government is seeking to guarantee sufficient supply and ease cost pressures on manufacturers and households.

Gas policy remains politically sensitive, with the government arguing gas is essential to support renewables during the energy transition, while environmental groups continue to oppose new developments on climate grounds.

Despite the controversy, Woodside maintains that gas will be a critical component of Australia’s energy mix in the medium term. The company said its expanded role in Gippsland would allow it to act more nimbly to bring new supply online and maximise existing infrastructure ahead of looming shortfalls.

Woodside has faced climate sensitivity around its global expansion efforts, like its new $19.2bn Scarborough LNG development that is poised to be completed within months.

Its annual meeting in Perth was a fiery affair. Despite a fresh climate protest from industry super funds and environmentalists, all three of its directors put in front of shareholders secured sufficient support to claim their board seats.

Originally published as Woodside to take control of Gippsland gas, eyes new east coast supply