Woodside Energy positive on Browse LNG deal

Woodside boss Meg O’Neill remains ‘cautiously optimistic’ a deal can be struck to allow gas from the giant Browse project to be processed through the North West Shelf LNG plant.

Woodside Energy chief executive Meg O’Neill remains “cautiously optimistic” a deal can be struck to allow gas from the giant Browse project to be processed through the North West Shelf LNG plant amid a broader shake-up of the joint venture controlling the offshore field.

Shell on the weekend sold its stake in the Browse field to joint venture partner BP in a move that may allow operator Woodside to mount a case for resurrecting the $US20.5bn ($30bn) project after decades of development delays.

Woodside has touted a plan for gas from the Browse project – ­located 425km north of Broome – to be piped 900km to top up the North West Shelf LNG plant in WA’s Karratha, where one of the five LNG trains is expected to shut in 2024 given a dearth of new gas to keep it filled.

Misalignment between the two gas joint ventures – both operated by Woodside, but with separate joint venture partners – has historically hampered progress with only four of the six NW Shelf partners also owners of the Browse project.

Ms O’Neill acknowledged the challenge but said there was fresh impetus on progress.

“Browse is a bit different because of its materiality and the investment that’s required on the NW Shelf side to enable processing Browse gas for 20 or 30 years. So it is a bigger agreement, it is a more complex agreement, but many of the framework terms and conditions have been agreed,” she said. “But the two ventures continue discussions and those discussions are going quite constructively. The misaligned partners do see that there’s value in continuing this journey to convert the Karratha gas plant to be a tolling facility. So I’m cautiously optimistic that we’re making progress.”

The Woodside chief said the BP deal on Browse was a “fantastic piece of news”.

Woodside has proposed adding a carbon capture facility to Browse with a sequestration component to be included from the start of operations rather than 10 years into the project as originally forecast. Consultancy Wood Mackenzie has previously stated the cost of Browse CCS could be up to triple the cost of Santos’ Moomba carbon plant in South Australia’s Cooper Basin.

She also addressed a looming tax hike expected in next week’s budget, saying it would tarnish Australia investment reputation and increase the risk of sanctioning new oil and gas supplies.

Treasurer Jim Chalmers has flagged the petroleum resource rent tax is likely to be changed in Tuesday’s budget, part of an overhaul of resource sector settings after windfall profits for the industry last year.

“The short version is if the tax rate goes up, that means projects in Australia will be less competitive compared to projects elsewhere,” Ms O’Neill told the Macquarie Australian conference on Wednesday. “We think fiscal stability really is essential.”

The extra slug follows political criticism that governments have not done enough to capture taxpayer revenue from oil and gas companies, especially at a time of high energy prices.

The Greens are also agitating for change, saying if the PRRT was applied to onshore gas projects, plus a 10 per cent royalty on offshore projects, it would generate an extra $29.1bn for the budget out to 2025-26.

“One of the things that is really important as we think about the investments we make, and just to remind everyone, when we take a final investment decision we will be spending capital for four or five years to build a facility,” Ms O’Neill said.

“And then we’ll be operating that facility for 20 or 30 years. So we have a very long-term orientation to our decision making.

“What is most important for us is fiscal stability.

“And you see the industry we operate in a variety of jurisdictions around the world and the government take is quite variable.”