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Woodside’s Perth Basin pressureTuesday, 7 July 2015


Blair Price


DID Woodside land another sweetheart domestic gas deal that it can walk away from or will it get this gas from an onshore Perth Basin acquisition? Energy News talks to a Browse-savvy analyst and a state government opponent.





Argonaut oil and gas analyst Philipp M-O Kin specialises in junior stocks but he was also the Browse asset economist for Royal Dutch Shell before he left the company to start his career as an analyst with RBS.




He paid special attention to the Browse floating LNG project’s domgas supply deal to supply around 800 petajoules of gas over the project life – about 60 terajoules per day.




“However a variation allows the supply to be from other sources and not directly from the offshore Browse fields (Brecknock, Calliance and Torosa),” Kin said in a research note.




“This allows the consortium to tap other gas sources to satisfy the Western Australian 15% domestic gas reservation policy.




“The Perth Basin is optimally located to fulfil the domgas requirement for the Browse project. Whilst all companies in the Perth Basin could potentially benefit from the increased attention we view, AWE Limited, Origin Energy, Empire Oil & Gas and Transerv Limited as best placed to supply the required 60TJ/d gas and thus the most likely targets.”




Kin said Woodside was already off the hook in supplying domgas from its Pluto project. He did not believe Woodside would be so lucky with the Browse FLNG project it operates.




“To be perfectly honest I don’t think they can get away with it again,” Kin told Energy News.




He believed that Chevron would already have enough to complain about given that the Gorgon LNG project it operates has to supply 300TJ/d of domgas while its Wheatstone project has to supply 200TJ/d when Woodside’s Pluto LNG operations doesn’t have to supply any domgas.




“I think there is going to be a bit of political pressure that they are going to have to supply this domgas,” he said of Woodside’s Browse deal.




“[WA Premier Colin] Barnett will want to leave his legacy that he secured enough domgas to see us through for the next 50 years or so.”




WA Labor’s shadow state development and energy minister Bill Johnston didn’t comment on the potential for a Perth Basin play although he knew the domgas agreement allowed for the gas supply to come from a non-Browse project field.




“But it also says, in the agreement, that if they market the gas and can’t sell it then they can reduce their [Browse dom gas] obligations,” he told Energy News.




“The problem with that is there is no obligation on them to market it at a reasonable price so they can market it at a high price, given it will be LNG, then argue that no one wants to buy LNG therefore the obligation doesn’t apply.




“Not only is there the ability for them to offset their obligations on to a different project they can also walk away from their obligations.”




In this regard he believed that Woodside was more likely to pursue the cheaper option of not supplying domgas if it doesn’t have to.




“Woodside are going to always be interested in their shareholders,” Johnston said.




“The state government should be interested in all West Australians. This is a test for Colin Barnett and whether he is actually trying to get a good outcome for all west Australians.”




Other Browse matters




Last month Johnston discussed Shell’s plan in 2012 to pipe the Browse project resources about 1000km to the Woodside-led North West Shelf LNG operation – before “Barnett wanted to pretend that he could force the proponents to go to James Price Point” – which was rejected as a project LNG plant site in 2013.




Kin confirmed that the proposal to backfill the NWS plant when it came off its production plateau post 2020 was always the cheapest option.




However, he also said the NWS venture was looking for new gas with any significant finds likely to make a more favourable investment case than a tie-in to the Browse fields.




“If they find another 1tcf field that’s another year and a half of production. They are looking quite strongly there.”




While the remoteness of the Browse fields was always the biggest commercialisation challenge, Kin said the quality of the gas was pretty good and the Browse FLNG project will benefit from second generation technology courtesy of the progress that will first be made by Shell’s Prelude FLNG project.




He also viewed that the Browse project could be a prospective $A50-60 billion development.