Gas pressure rising for Woodside
The government is ramping up pressure on Woodside and its partners in the Browse and Scarborough gas fields.
The federal government is ramping up the pressure on Woodside Petroleum and its joint venture partners in the Browse and Scarborough gas fields, with the powerful petroleum titles registrar said to be the latest agency to ratchet up threats to strip the rich acreage from the partners.
The National Offshore Petroleum Titles Administrator (NOPTA) delivered the threat in a recent “high-level” meeting with oil and gas industry officials, according to Credit Suisse analyst Saul Kavonic, who circulated details of the discussions in a client note yesterday.
The strong talk from NOPTA comes after Resources Minister Matt Canavan last month delivered his own blunt assessment of the chances of the Browse partners, which include Woodside, Shell, BP, Japan Australia LNG and PetroChina, winning an extension to leases on the project when they expire next year, telling The Australian the “clock is ticking” on development of the project.
NOPTA has doubled down on that threat, according to Mr Kavonic, who suggested the titles registrar could get creative with conditions if a lease extension is given, or try to force out recalcitrant partners and give Woodside greater control of the final investment decision on the project.
Woodside boss Peter Coleman admitted the company faced headwinds during an investor tour of its Pluto facilities in WA last month, confirming a six-month delay to reaching a tolling agreement for Browse gas through the North West Shelf processing facilities.
He told analysts that delays in reaching a price for sending Browse gas through the facility had lagged because the focus had been on setting the terms for a “generic” agreement to process third-party gas, and then one of the North West Shelf partners had demanded a reset of the process, putting back a final outcome for at least six months.
Woodside has also said its partners won’t be ready to make a final investment decision (FID) on Browse until late 2020, when front-end engineering and design studies are done, putting it on a collision course with regulators and Senator Canavan over the extension of retention leases in mid-2020.
“We wonder if NOPTA will be creative here, perhaps insisting on a production licence with some time frame leniency, a retention lease extension with shorter duration and/or material break costs if FID isn’t taken, or other bespoke terms, to maintain timeline pressure for development, and not simply allow another five-year window to proceed,” Mr Kavonic said.
“Another consideration for NOPTA would be devising a way to ensure the licence is passed to a motivated JV, which we expect could include some existing JV participant such as Woodside, but exclude partners who have not proven the same level of motivation in the eyes of the regulator.”
Mr Kavonic said Woodside would likely be the winner from any government intervention, as the two projects represented its major growth projects.
He added that pressure from state and federal authorities on more reluctant partners in any of the projects, including the North West Shelf, would help move them along. “All of this plays into Woodside’s hands as it attempts to shepherd the joint venture cats across the finishing line at Scarborough and Browse,” Mr Kavonic said.
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