Woodside sells 15.1pc stake in its $16.5bn Scarborough LNG project
The deal is the second equity sale by Woodside in the Scarborough project, with the transaction underscoring Japan’s desire to secure gas supplies.
Woodside Energy has agreed to sell a 15.1 per cent stake in its Scarborough LNG project to Japan’s largest power generation company, JERA, in a deal worth US$1.4bn ($2.14bn).
The equity selldown, which Woodside said includes a purchase price of approximately $US740m and reimbursement costs to Woodside for JERA’s share of expenditure incurred from the transaction effective date of 1 January 2022, is the second divestment in the $16.5bn LNG project undertaken by the Perth-based oil and gas major.
Having already sold 10 per cent to a Japanese consortium last year, the influx of around $2bn will ease the capital expenditure burden on Woodside to develop the Scarborough facility.
Woodside said the deal with JERA also includes an agreement for the sale and purchase of six LNG cargoes on a delivered ex-ship basis per year for 10 years commencing in 2026, while the two have also agreed to partner on potential opportunities in ammonia, hydrogen, carbon management technology and carbon capture and storage.
JERA has also acquired an option to acquire a 15.1 per cent non-operating participating interest in the Thebe and Jupiter fields, as well as a non-binding agreement where both companies could partner to pursue opportunities for additional feed gas and joint investment in offshore gas fields for future tieback to the Woodside’s Pluto LNG facility via Scarborough infrastructure.
Woodside’s deal with another Japanese organisation indicates a soothing of Japanese tensions with Australia, triggered when the Albanese government moved to impose a price cap on new gas supplies on the east coast and the reliance of Tokyo on Canberra for its energy security.
Woodside chief executive Meg O’Neill said the deal with JERA is the latest chapter in a decades-long relationship between the two.
“This builds on a long history of collaboration, starting in 1989 with LNG sales from the North West Shelf to JERA’s parent companies Tokyo Electric and Chubu Electric,” Ms O’Neill said.
“JERA’s participation in the Scarborough Joint Venture, which will also include LNG Japan, is a further demonstration of the importance of the project to Japanese customers and confidence in long-term demand.”
Japan is one of the largest foreign investors in Australia’s gas industry, but the intervention of the Albanese government in 2022 through its mandatory code of conduct – the centrepiece of which included a $12 cap on new gas – stoked alarm from Tokyo.
The head of Japan’s biggest oil and gas company last year said Australia could provoke global instability should it continue with policies that amounted to “quiet quitting” of the LNG industry.
Tensions have since eased after the government moved to soften its centrepiece legislation, offering a plethora of exemptions that the LNG industry says strikes the right balance.
Resources Minister Madeleine King said the JERA deal demonstrates Japanese support for Australia’s policy that seeks to balance affordable local gas supplies and aid LNG exports.
“We know that the Scarborough project is vital to future energy security as part of decarbonising energy systems in both WA and in Japan,” Ms King said.
“Today’s announcement from Woodside and Jera reaffirms the importance of Australian energy exports to energy security in north Asia, as well as Japan’s confidence in Australia as a reliable destination for investment.”
Yukio Kani, JERA’s chief executive, said the partnership is an illustration of what is needed to meet global transition targets.
“Solving the world’s energy issues requires deep collaboration to tackle challenges one by one with reliable partners,” Mr Kani said.
“I look forward to further developing our relationship with Woodside, a global player in LNG, and to promote new initiatives to achieve decarbonisation.”
The comments from Mr Kani are likely to inflame environmentalists. While resource-poor countries like Japan insist gas will give time for countries to develop zero emission sources of power, opponents insist it delays the transition and risks worsening climate change.
Further equity stake sales in Scarborough are likely. Woodside will still own around 75 per cent of Scarborough, and it has indicated it would likely reduce it down to nearer to 50 per cent.
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