More may exit NW Shelf: Pickard

Woodside Petroleum director Ann Pickard says more energy majors could join Chevron in exiting Australia’s largest LNG project.

Woodside Petroleum director Ann Pickard.

Woodside Petroleum director Ann Pickard has raised the prospect that more energy majors could join Chevron in exiting Australia’s largest LNG project, the $34bn North West Shelf, with a new infrastructure-style tolling model unlikely to suit some big gas players.

The West Australian export plant will process gas from other producers to extend the life of the facility beyond 2025 to counter declining output from its offshore fields.

Chevron has put its one-sixth stake up for sale in a potential $US3bn-$US4bn ($4.3bn-$5.8bn) deal and Ms Pickard said others could follow given the changing strategy.

“It’s time that the venture changes,” Ms Pickard told the Annual Credit Suisse Australian Energy Conference on Wednesday.

Woodside operates the plant in a joint venture with BHP, BP, Chevron, Shell, Mitsubishi and Mitsui. It may exploit its own pre-emptive rights and look at a deal where it takes part of Chevron’s stake in tandem with a new buyer.

If majors did not have supplies “to go through it, they don’t want the returns that they’re going to get on an infrastructure play. It makes perfect sense and it will be interesting to see how it all plays out,” she said.

Ms Pickard, a former chair of Shell Australia, lamented the failure to build a sixth LNG train at the NW Shelf plant, with Woodside instead opting to go it alone with its Pluto LNG facility. The six-strong joint venture at NW Shelf, which started exporting LNG in 1989, had developed into a challenging collection of at times competing interests.

“The NW Shelf is a fantastic asset with the most difficult partnership agreement I’ve witnessed in 30 years of business,” Ms Pickard told the conference.

“I’ve heard it called the goat rodeo or herding cats. It’s an amazing partnership that functioned really well early on but then as all the partners got to be bigger, the competing interests got in the way. It’s really sad to see they’ve been unable to come together to build the next train,” she noted.

Former Woodside boss Don Voelte has suggested Shell and BP might quit the NW Shelf venture.

Shell said it was focused on adding value to the facility by tapping new supply sources.

“The current investors in that project are really keen to see how that asset is both effectively managed in the longer term and continues to be a valuable asset. So we’re very supportive of any approach that continues to maximise the value and brings in other supply,” Shell Australia chair Tony Nunan told the conference.

The energy major said it was focused globally on tapping existing infrastructure, which may suggest a long-term appetite to develop the delayed Browse field where it holds a stake and which Woodside wants to use as a big new supply source for the NW Shelf.

“It makes sense that the use of existing infrastructure, of existing plants is a way of being able to reduce cost. So you‘ve either got very, very low cost supplies or you’ve got backfill to existing infrastructure, which seems to be an approach the industry is taking globally to be able to then continue to develop,” Mr Nunan said.

“I think what Woodside as operator and each of the partners are doing at the moment is absolutely the right approach, which is identifying opportunities for additional supply into the NW Shelf. As operator Woodside has looked at multiple options and is presenting that into the venture and they‘re all progressively being worked. It’s very difficult for me to say here and now which one of them is going to be landed.”

Asked if the NW Shelf venture had considered the possibility of any of the five NW Shelf trains being curtailed due to a lack of gas supplies, Mr Nunan said every possibility was being weighed up by the six partners. “Any venture has to play through scenarios that exist for an asset. It will be happening with NW Shelf and it will be happening with every asset globally,” Mr Nunan said.

“Of course the best way of continuing to maximise the value of the asset is to find additional supplies. But as an operator and venturers we also have to consider what will happen if that doesn’t occur. And I know within the venture all scenarios are being played out. We‘re certainly hopeful that there’s a path to additional supply into NW Shelf.”