Woodside sticking with Pluto LNG processing
Woodside Petroleum has rejected a push to process gas from its $16bn Scarborough gas project through the North West Shelf LNG plant.
Woodside Petroleum has rejected a push to process gas from its $16bn Scarborough gas project through the North West Shelf LNG plant, sticking with an expanded Pluto facility amid strong interest from infrastructure investors in a planned selldown of its ownership.
The West Australian producer had planned to process gas from its remote Scarborough field to prop up an expansion of its Pluto LNG project with gas from the long-delayed Browse field to fill the NW Shelf plant.
However, this year’s oil price crash has forced Woodside to delay both Scarborough and Browse, with some investors now making the case for Scarborough gas to help fill NW Shelf given the looming available capacity.
Citi has been pushing Woodside to go with the NW Shelf option saying Woodside would have to write a $US1.1bn equity cheque to fund its expansion of the Pluto LNG plant.
However, Woodside said Pluto Train 2 will be 30 per cent cheaper than the NW Shelf and has a shorter development time with plans to make a final investment decision on Scarborough by the second half of 2021 and first production by 2026.
Woodside has previously noted longstanding issues among NW Shelf partners to get a separate gas processing deal for Browse and does not see it as an easy fix to suggest the same solution for Scarborough.
“NW Shelf is not designed for large volumes of Scarborough gas, a new train is more cost efficient than modifications to NW Shelf and it extends the economic life of Pluto LNG at minimal cost,” Woodside said in slides ahead of its annual investor presentation on Wednesday.
“Scarborough to NW Shelf commercial negotiations would delay FID and delays would risk current contracts, heads of agreements and sales and purchase agreements.”
Woodside also makes the point it owns 90 per cent of Pluto Train 1 and will keep 50 per cent of Train 2 compared with just a one-sixth holding in NW Shelf. Strong interest from infrastructure investors has been received for a planned 50 per cent selldown of Pluto 2, Woodside noted.
Development of the Browse field remains on the backburner with Woodside targeting a final investment decision from 2023 onwards.
Woodside also laid out staged plans to help achieve net zero emissions by 2050 with reductions of 15 per cent by 2025 and 30 per cent by 2030 in net equity Scope 1 and 2 emissions compared with the 2016-2020 period.
“We plan to achieve these targets using a range of levers: designing out emissions in new and existing facilities, potentially including carbon capture and storage; limiting emissions through efficient operations; and using high-quality offsets,” Woodside chief executive Peter Coleman said.
Woodside’s $US4.2bn Sangomar venture in Senegal also had a further shake-up on Wednesday after junior FAR announced plans to sell its 13.7 per cent stake to India’s ONGC Videsh for $US45m at completion and $66m for costs incurred since the start of the year.
Woodside in August paid $US400m to pre-empt Russian oil giant Lukoil buying a 40 per cent stake in Sangomar, handing it a 68 per cent share of the project.
Mr Coleman indicated Woodside may in time look to sell down its stake and said the move was in part “protecting shareholder interests” given Lukoil was the subject of US sanctions which could introduce a fresh layer of political risk to the development.
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