Woodside Petroleum still in LNG talks with PetroChina

09:22, February 26, 2010      

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Woodside Petroleum Ltd remains in talks to sell PetroChina Co liquefied natural gas from the $30 billion Browse project off Australia, after an initial supply agreement lapsed, Chief Executive Officer Don Voelte said.

Australia's second-largest oil and gas producer was also contacted by as many as five other potential buyers when the PetroChina accord wasn't renewed, Voelte said in a interview yesterday.

"Two people can pull out of the deal," Voelte said. "Maybe as we progressed, maybe we kinda fell out of love with the deal."

The preliminary agreement with China's largest oil and gas company to supply as much as 3 million metric tons of LNG a year was valued at about A$45 billion ($40 billion), Voelte said in August. Woodside expects Chinese demand for its LNG to increase, he said.

"Very little LNG goes to China at this time," Voelte said. "It's a growing market. Most LNG from our company goes to Japan and a little to South Korea. We see China as a growth market, but we don't count on it to be the only one."

PetroChina's Hong Kong-based spokesman Mao Zefeng wasn't immediately available for comment.

Supply guarantee

Woodside is in discussions with at least three possible customers, including a company in China, to sell Browse LNG, Voelte said on Feb 9. PetroChina's initial accord to buy gas from Browse expired because the Australian gas producer couldn't guarantee it would meet the original timeline for supplying the fuel, the Chinese energy company's parent said on Jan 5.

Woodside and partners Chevron Corp, Royal Dutch Shell Plc, BP Plc and BHP Billiton Ltd this month opted to process the fuel at a hub in the Kimberley region of Western Australia after accepting a government deadline to decide how to develop the venture. A final investment decision for Browse is due in 2012.

The Browse fields, off Western Australia, are estimated to contain 13 trillion cubic feet of sales gas and 355 million barrels of condensate, a type of light oil, Macquarie Group Ltd said in a note yesterday.

The first stage of Woodside's Pluto LNG project is more than 80 percent complete and initial LNG is expected in early 2011. That depends on "a productive industrial relations environment", Woodside said on Wednesday.

The Australian energy company has agreements with "sister plants" to supply LNG to customers should strikes delay the A$13 billion venture in Western Australia, Voelte said. Woodside devised the "risk mitigation" measures after talks with customers, the Perth-based company said.

"We don't have to put the plans in place if we don't need them," Voelte said. "It's not uncommon in the industry because LNG plants are so costly and so big that when you shut them down for maintenance or to replace equipment your customers just can't go without. So if you are planning a big shutdown, let's say in 2012, the other plant is there to supply volumes to match it."

Woodside aims to allocate about 55 percent of the budget to build Pluto for Australian companies, Voelte said. "What we can build in Australia, we will build in Australia."

Local content

LNG developers in Australia are having gas-processing units built in cheaper Asian locations and shipped in, and engineering and design work done overseas, economists at Goldman Sachs JBWere said in a report this month.

In Australia, a skills shortage and higher wages will make it difficult for companies to build multiple LNG plants at the same time, Voelte said. And "there are an awful lot of goods and services that Australia doesn't make for LNG plants".

Woodside on Tuesday reported a 2.1 percent increase in 2009 net income to A$1.82 billion.

Source: China Daily
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