Woodside CEO Meg O’Neill a step closer to unlocking new gas at Scarborough

Pluto LNG Plant, Karratha. Picture: Woodside

The pieces are coming together for Woodside CEO Meg O’Neill ahead of a final investment decision by the board the company’s $16bn future growth project Scarborough.

Earlier in the year, O’Neill’s handling of the merger of Woodside and BHP’s petroleum business as acting CEO was singled out by the board as a reason to appoint her permanently in the role. BHP is a partner in Scarborough.

Four months later, O’Neill and her team have put the second part of the puzzle in place, landing Global Infrastructure Partners as 49 per cent partners in the $7.6bn Pluto 2 LNG plant that will process gas from Scarborough.

The sale brings down risk with lower cost infrastructure capital coming in for the infrastructure build. That will allow Woodside to apply more capital to the upstream business. For shareholders Woodside is deploying cost of capital where it should be.

This is why O’Neill can rightly talk of a significant milestone in derisking the final investment decision (FID). “One of our challenges with Scarborough and Pluto train two was the impact on the balance sheet” she said. “Selling down 49 per cent enables us to take a final investment decision. We will have the balance sheet capability to be able to progress the investment.”

Meg O’Neill says Woodside bought into Scarborough in 2018 with the vision that it would underpin the investment in a second LNG train at the Pluto site.

“We have been targeting infrastructure players who would view an LNG train as a particularly attractive type of investment. It offers well known capital upfront and then revenue certainty over a very long period of time,” she said.

The market has been waiting for the deal which involved early interest from both Brookfield and CKI. The price was clearly right but O’Neill says GIP’s global capability and its existing investments in Australian LNG infrastructure made it well known in-country and within the industry.

Beyond that she says finding the right partner for a 20 to 30-year venture meant thinking about a marriage and building a relationship. “We have had a bit of a dating process, getting to know each other. What is really exciting about today’s announcement is that we have said our ‘I dos’ and signed the contract.”

The deal signals continued investor appetite for oil and gas assets despite ESG pressure from many quarters. Meg O’Neill again pitched Woodside as part of the energy transition solution. The GIP investment helps fund Pluto which in turn helps Woodside’s Asian customers to meet their decarbonisation goals.

“The hype around the state of the energy market is very different from the reality,” she said. “We don’t have to look too far past the near term price increases to see what might happen if you get into a situation where we have underinvestment. We are going to see far more volatility in the market and at the end of the day that is not going to be good for consumers.”

The Woodside BHP merger is understood to be on track for the second quarter of 2022.