Woodside partner eyed for slice of Shelf

Woodside may look to cut a deal with a new partner where it would split Chevron’s stake in the $34bn North West Shelf.

A platform on the North West Shelf project

Woodside Petroleum may look to cut a deal with a new partner where it would split Chevron’s stake in the $34bn North West Shelf and sell down part of its Scarborough project, consultancy Wood Mackenzie said.

Chevron has put its one-sixth stake up for sale in a potential $US3bn to $US4bn ($4.3bn to $5.8bn) deal with Woodside, as operator of the plant, firming as a likely bidder. Rather than buying Chevron’s entire 16.7 per cent stake, it may look to engineer a deal involving equity stakes in both projects.

Woodside has previously said it planned to offload a third of its 75 per cent stake in the remote Scarborough gas field, part-owned by BHP, which would feed an ­expansion of the existing Pluto LNG facility near Karratha.

However, if Woodside embarked on a deal involving both projects it may make more sense for Scarborough gas to be piped into the NW Shelf, avoiding the need for a costly Pluto expansion.

“For Woodside a deal could see the development of its Scarborough upstream project flowing into the NWS. This option could be a more economical alternative when compared to constructing a new Pluto expansion train,” WoodMac Asia Pacific vice-chairman Gavin Thompson said.

“Though any facility modifications to accommodate for Scarborough gas and the increased budget for the Karratha Life ­Extension-2 project will need to be taken into consideration. Woodside’s ownership of upstream molecules that are most likely to supply the project in future will create greater value in owning additional equity.”

A national oil company could be lured by the prospect of a twin deal or Woodside may decide to keep a high-equity stake in Scarborough for itself.

“This option could also change the outlook for Woodside’s planned selldown of its positions in both Scarborough and the Pluto expansion train,” Mr Thompson said. “Would Woodside still pursue a farm-down of Scarborough? And if so, could a divestment provide a pathway for an NOC to enter not only Scarborough but also the NWS itself? Both are possible outcomes.”

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

Shell and BP were named by former Woodside boss Don Voelte as two majors that might quit the NW Shelf venture.

WoodMac agreed: “Both Shell and BP could be encouraged to review their NWS positions. Increasingly vocal in their commitment to reducing CO2, the NWS infrastructure, among the world’s oldest and least efficient LNG projects, may be increasingly unattractive as both companies work towards carbon neutrality,” Mr Thompson said.

Citi has said that regardless of whether it buys the Chevron stake, Woodside should look to process Scarborough through NW Shelf rather than expanding Pluto. That move would ease balance sheet pressure, boost Scarborough‘s break-even LNG price given lower NWS tolls and improve returns for BHP, its Scarborough partner.