Woodside warns of danger delaying NW Shelf gas deal

Woodside has urged ­Chevron and BHP to seal an ambitious Browse to North West Shelf gas deal quickly.

Energy producer Woodside Petroleum has sent a warning to ­majors Chevron and BHP to seal an ambitious Browse to North West Shelf gas deal before the development is leapfrogged by rival international LNG developers.

Woodside CEO Peter Coleman is facing pressure to pull off an ambitious LNG expansion in Western Australia involving piping gas from the long delayed Browse gasfield to the North West Shelf plant in ­Karratha.

But partners in the two joint ventures are yet to agree on a path forward, with Mr Coleman wary it may be leapfrogged by rival suppliers to meet a forecast LNG demand “window” from about 2024 should a deal not be sealed soon.

“I think the window is down. I think we’ve entered the front end of the window and the back end of the window is really first quarter next year,” Mr Coleman said.

“If you start moving much further out than that then you’ll start to see that other projects will start to move forward and, of course, customers will start to lose interest in the projects.”

Mr Coleman suggested Chevron and BHP were the companies not aligned in the two ventures.

“I am absolutely positive you can work out the math, you just have to look and say who is in Browse and who is not in Browse,” Mr Coleman said after delivering Woodside’s first-half results.

Woodside, BP, Shell and Japan Australia LNG all hold stakes in both NW Shelf and Browse, while Chevron and BHP only have ownership in the NW Shelf.

Woodside’s half - year profit bviz

Adding to the equation, Woodside and BHP are also partners in the remote Scarborough project, which is in line to supply a planned expansion of Woodside’s Pluto LNG plant.

Woodside is due to make final investment decisions on Browse and Scarborough next year.

“I think its time for a number our partners in the joint venture to move beyond self-interest and start to look at the bigger picture,” Mr Coleman said. “There is a prize here we need to be careful that we don’t lose.”

The NW Shelf is facing the depletion of its gas reserves in the next few years, forcing the facility to move to a new tolling model where it will process gas from third parties for the first time.

Woodside yesterday rebooted its dividend reinvestment plan — last triggered in 2016 after oil ­prices plunged — which allows shareholders to convert dividends into additional shares. The move was made to reflect an expected rise in investment as it nears sanctioning the two projects.

Woodside declared an interim dividend about a third lower on last year at US36c a share, compared with US53c a share. Citi said Woodside was “prudently preparing its balance sheet ahead of capital expenditure”, but Bernstein said the reactivation of the DRP “will not please investors”.

Woodside shares fell 6.73 per cent to $31.18.

The producer suffered a 23 per cent fall in first-half profit after taking a hit from maintenance at its flagship Pluto LNG plant. Net profit after tax for the six months to June 30 fell to $US419 million ($620m), from $US541m. Revenue fell 5 per cent to $US2.26 billion. It retained its guidance for production this year at the lower end of 88-94 million barrels of oil equivalent and said it was on track to achieve annual production of 100 million boe next year.

Mr Coleman said a drawn-out US-China trade war would crimp growth and lower demand for commodities.