Woodside plans new gas project

Woodside Petroleum, Australia’s second-largest oil and gas company, plans to spend “several billion dollars’’ on a new liquefied natural gas project to tap demand in Asia and North America.
A final decision to build the plant, which Morgan Stanley estimates may cost at least A$ 5 bn ($ 3.8 bn), is planned for mid-2007, Perth-based Woodside said. Deliveries from the project in Western Australia, which will use gas from Woodside’s offshore Pluto field, could start in late 2010.

Chief Executive Don Voelte, who joined Woodside in 2004, said in April he was considering plans for the early development of Pluto. Woodside owns one-sixth of the A$ 14 bn North West Shelf venture, Australia’s only producing LNG project, and is also seeking customers for its Browse LNG project.
“Don has been very bullish about LNG since he took over the reins,’’ said Jodie Phillips, an oil and gas analyst at Macquarie Equities in Sydney. “I do wonder whether they would maintain 100 % equity. What they could look at doing is, whoever is the purchaser of the LNG taking’’ a stake in the project, she said.

The North West Shelf venture, operated by Woodside, in June approved a A$ 2 bn investment to build a fifth LNG production line at Karratha, a 4.2 mm tons-a-year unit that is due for completion in 2008. LNG is natural gas cooled to liquid form for transportation by tanker to destinations not connected by pipeline. On arrival, it is turned back into gas form for supply by pipeline to users such as power stations.
Emerging demand for LNG in India, China and the west coast of North America, and supply difficulties in Indonesia are expected to keep the Asia-Pacific LNG market “tight’’ in the next few years even as new projects start up, the Australian Bureau of Agricultural and Resource Economics said in June.

The Woodside-operated North West Shelf venture supplies LNG to Japan and South Korea and is due to start exports to China by mid-2006. ConocoPhillips is due to start delivering LNG from a $ 1 bn LNG plant in Darwin to Japanese customers early next year, while Chevron Corp is planning a A$ 11 bn project to develop the Gorgon gas fields off Western Australia for LNG supply to North America and Asia starting in 2010.
LNG from Pluto is intended to fill a “strong LNG demand window opening between 2010 and 2012 in the Asia-Pacific and North America,’’ Woodside said in a statement, which was lodged with the exchange. “Substantive progress’’ on LNG sales agreements for Pluto gas are expected by the end of the year, it said.

About half of the LNG from Pluto is likely to be sold to existing established LNG customers under longer-term contracts, with the rest to customers in newer markets including North America, Voelte said.
“In all of this the critical thing first is the gas customer or customers, and if they get that there’s a reasonable amount of certainty, they’ve probably got the basis for a project,’’ said Stuart Baker, a Melbourne-based energy analyst at Morgan Stanley. “What they’ve said suggests to me they must have a new market opportunity here that isn’t going to conflict with their North West Shelf position.’’
The cost of the project, including the offshore field development, pipelines and onshore gas processing plant, may be at least A$ 5 bn, Baker said.