Canberra puts its foot on the gas
The government may strip Woodside of ownership of Australia’s biggest undeveloped gas field if it doesn’t get cracking.
Federal Resources Minister Matt Canavan says he will use the “clear message” sent by last month’s federal election victory to help ramp up resources development, warning Woodside Petroleum and a consortium of the world’s biggest oil and gas companies he will strip them of ownership of Australia’s biggest undeveloped gas field if they don’t get cracking on the project.
The threat is part of the federal government’s renewed push to open up new resource basins across the country in the wake of its stunning election win in May, with Browse joining Queensland’s Galilee Basin coal fields, the Beetaloo gas play in the Northern Territory and the Great Australian Bight on Senator Canavan’s target list for the next term of government.
Despite the billions already spent on the giant Browse gas fields off the northwest coast of WA, Senator Canavan told The Australian he was more than ready to call in other would-be project developers, potentially including Fortescue Metals, if the current Browse owners — which include Woodside, Shell, BP and PetroChina — could not convince him they were ready to make a final investment decision when the retention leases on the fields come up for renewal next year.
Speaking to The Australian, Senator Canavan said he wanted to see the partners commit to developing Browse before the project’s current licences expire. “The clock is now ticking,” he said.
“The existing retention lease expires on the June 30 next year and without a locked-in plan going forward to develop Browse we may have to look elsewhere.”
Fortescue could be one of the biggest potential winners from any move to strip Woodside and its joint venture partners of the retention leases covering Browse. The Andrew Forrest-chaired company has long eyed an entry into LNG production, and has been a prominent advocate for reform to Australia’s retention lease system to allow new players access to Australian projects it says have been warehoused by the global majors.
Gas was first discovered at Browse back in 1971, but the huge fields have remained undeveloped despite the project partners spending billions of dollars on a series of assessments.
Woodside has been leading a front-end engineering and design study into a $US20.5 billion ($29.8bn) development that would involve pumping the gas from Browse more than 900km south through an underwater pipeline to the existing North West Shelf LNG plant near Dampier. Gas from Browse would then be used to top up supply into the North West Shelf as the fields currently feeding the plant start to decline.
Senator Canavan said he had held discussions with both the current project partners and other parties about commercialising the Browse Basin.
“I want to see the Browse gas and oil developed for the Australian people,” he said.
“There are very clear obligations on titleholders in Australian waters that, if they can’t bring projects to development, there’s the right and opportunity for the Australian government to look for others who can do that.”
Senator Canavan’s comments will intensify pressure on Woodside and its partners in both Browse and the North West Shelf to accelerate their work.
The North West Shelf partners late last year signed a heads of agreement spelling out the commercial terms for processing Browse gas through the existing plant, but that has not yet advanced into a binding, fully termed deal.
Woodside has said it wants the joint venture to make a final investment decision, or FID, on Browse by next year.
Senator Canavan acknowledged that there had been a number of positive developments at Browse in the past 12 months but noted “we are now in the final straight”. He said: “We need to see not just good intentions and words — I want to see real investment plans and hopefully a real decision on FID.”
Browse was on the cusp of development earlier this decade, when Woodside was pushing for the controversial development of an onshore LNG plant at James Price Point north of Broome, but that plan was killed off when engineering work found the plan would cost more than $US50bn.
There was also a push to exploit the fields through floating LNG vessels such as the one built by Shell for the nearby Prelude field, but that plan lost momentum as Prelude took longer than expected to build.
Arguably Browse’s biggest issue in recent decades has been a lack of alignment between the project’s various partners, many of whom had their own competing LNG development projects elsewhere in Australia and the world. US oil giant Chevron sold its stake in Browse to Royal Dutch Shell in 2012 for $US450 million, while BHP offloaded its interests to PetroChina a year later for $US1.63bn.
Browse contains almost 14 trillion cubic feet of gas and around 390 million barrels of condensate, making it one of, if not the, largest undeveloped gas field in Australia.
A spokeswoman for Woodside yesterday confirmed the company was targeting a final investment decision for Browse of late 2020 with the project expected to be ready for start-up in 2026 and 2027.
She said the Browse joint venture supported Woodside pursuing that schedule.
