Petroleum’s Browse pipeline plan on again
Woodside is once again considering the Browse pipeline option.
Woodside Petroleum has resurrected its long-abandoned plans to build a pipeline between its huge but remote Browse gas fields and its increasingly gas-hungry North West Shelf liquefied natural gas plant.
Woodside chief executive Peter Coleman yesterday confirmed the pipeline was once again a real option for the Browse fields, which are yet to be developed more than 40 years after their initial discovery.
And Mr Coleman also moved to hose down the likelihood of a potential stoush over its proposed $US430 million ($563m) acquisition of an interest in an oil discovery off Senegal, arguing that the project’s disgruntled junior partner FAR had no grounds to challenge the deal.
Speaking with journalists in Perth yesterday, Mr Coleman said the looming decline in production from the North West Shelf coupled with cost deflation throughout the oil and gas industry meant the pipeline option was “back on the list” for Browse.
“For us it’s time to go back and have a look at (the pipeline option) and see if it makes sense,” Mr Coleman said.
Browse has been through a series of false starts over its long history. A huge onshore LNG plant at James Price Point north of Broome was abandoned in 2013 while earlier this year Woodside and its partners shelved plans to develop it through a series of massive floating LNG vessels.
The future of the North West Shelf plant — one of the largest resources projects in the country — has become more uncertain as it nears the point at which the gas supply from its existing fields begins to drop precipitously.
Woodside and its partners in the North West Shelf have developed a series of smaller fields around the project in recent years to keep the LNG plant full, but Mr Coleman said the project was running out of options and would start to run short of gas in the early 2020s.
“We’ve been doing all these small plateau extension projects which have all been designed to push it out another year ... We don’t have any of those left; we’ve developed everything we had in the cupboard, so to speak,” Mr Coleman said. “Now we can get our heads around how we start to fill it and we’re starting those conversations.”
Connecting Browse to the North West Shelf would eliminate the need to build costly new LNG processing facilities but would require the construction of a 1000km subsea pipeline back to the Pilbara. Production from Browse would also be constrained by the amount excess capacity available within the North West Shelf plant.
Since shelving the floating LNG plan for Browse earlier this year, Woodside has previously flagged its interest in assessing alternative floating LNG technologies held by companies other than that of project partner Royal Dutch Shell in the hope of finding more cost savings.
Mr Coleman said the Browse joint venture team was studying several different development concepts and would narrow that down to two to three options by the end of the year.
“The good thing about Browse is that, for the first time ever, we’re not under pressure to develop,” Mr Coleman said.
“We will move it forward as soon as we can, but there’s no pressure to develop Browse, because the market’s not there anyway. We can do all of the required work to get a really thoughtful and sensible outcome on Browse, where previously it always felt as if we were rushing towards the starting line.”
Amid the recent uncertainty around Browse, Woodside has been looking to rebuild its pipeline of growth options through a series of new exploration projects and asset acquisitions.
Its most recent deal, to pick up ConocoPhillips’s 35 per cent interest in a big oil discovery off Senegal, hit a potential snag this week when the project’s 15 per cent owner FAR argued it should hold pre-emptive rights over the ConocoPhillips stake.
Mr Coleman said the fact Woodside was acquiring the ConocoPhillips subsidiary company that holds the Senegal stake, rather than the stake directly, meant pre-emptive rights had not been triggered.
In addition, he said FAR would not be eligible to exercise any pre-emptive right in its current form as it would not pass the financial capacity test needed to do so.
“FAR’s notice was surprising to us because one, they didn’t pre-empt; two, the asset is a company, you can’t pre-empt companies; and three, they’d need to demonstrate their financial and technical capability. So there’re some big hurdles for them to get over,” Mr Coleman said.
He added he was “very comfortable” with the way that ConocoPhillips was managing the sale process. “There’s nothing that we would see at the moment that would indicate this would not go through. We expect this to go through and we expect to close it by the end of the year,” he said.
FAR Price at posting:
7.6¢ Sentiment: Hold Disclosure: Held
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