Woodside May Award Pluto LNG Expansion Contract This Quarter
By Ben Sharples
July 24 (Bloomberg) -- Woodside Petroleum Ltd., operator of the A$12 billion ($9.8 billion) Pluto liquefied natural gas project in Western Australia, may award a design and engineering contract for an expansion of the venture by the end of September.
An agreement is expected in the third quarter, subject to talks with potential suppliers of gas that will underpin the expansion, Woodside said today. Discussions with a number of parties are progressing, Roger Martin, a Perth-based spokesman, said by phone.
Woodside, Australia’s second-biggest oil and gas producer, is in talks with four potential suppliers of gas for an enlarged Pluto, Chief Executive Officer Don Voelte said last month. The cost of an expansion of the project, targeting increased demand in Asia for cleaner-burning fuels, has been reduced as the global recession drives down prices.
“A Pluto expansion is getting very real, I think they will move on it,” Peter Arden, an analyst at Ord Minnett Ltd. in Melbourne, said by phone. “Woodside can probably do it fairly economically -- steel and labor costs are down, it makes a lot of sense.”
Woodside, 34 percent owned by Royal Dutch Shell Plc, rose 60 cents, or 1.4 percent, to A$44.30 at 1:10 p.m. Sydney time on the Australian stock exchange. The benchmark S&P/ASX 200 index gained 0.9 percent.
Foster Wheeler Ltd., Technip Chiyoda Fluor and KBR Inc. submitted proposals for design and engineering work at an expansion of Pluto in October.
Competition for Gas
Development of the first production unit at Pluto is 65 percent complete and on schedule to deliver LNG to customers in 2010, Woodside said. The Perth-based company agreed to non- exclusive talks with Apache Corp. and a unit of Kuwait Petroleum Corp. for gas to be sold through a second plant, it said in May.
Woodside is competing with Chevron Corp.’s neighboring Wheatstone venture for potential gas supplies. The California- based company last month ruled out developing its wholly owned project with Pluto.
Wheatstone may support as many as five liquefied natural gas production units, Roy Krzywosinski, managing director of Chevron’s Australian unit, said in June. Chevron, the second- largest U.S. gas company, said it would offer fair and reasonable terms to attract gas from other producers for processing at the project.
Chevron plans to make a development decision on Wheatstone in 2011, Nicole Hodgson, a Perth-based spokeswoman said in an e- mailed response to questions today. Marketing plans for the project are confidential, she said.
Sales Drop
Woodside’s second-quarter sales dropped 36 percent to A$938 million ($764 million) from A$1.475 billion a year earlier, Woodside said today. That compares with estimates of A$903 million from JPMorgan Chase & Co. and A$991.4 million from UBS AG. Oil in New York has dropped 55 percent from a record $147.27 a barrel reached in July last year.
The Vincent field in Western Australia was shut down in April after a blaze on the production ship and maintenance was conducted on the Enfield venture, reducing output. Production was 1 percent higher at 19.4 million barrels of oil equivalent.
Woodside maintained its full-year production of forecast of 81 million to 86 million barrels of oil equivalent. The company reiterated that two LNG units at the North West Shelf venture would be shut for up to 25 days for maintenance this quarter.
LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline.
---Editors: John Viljoen, Clyde Russell.
To contact the reporter on this story: Ben Sharples in Melbourne at [email protected]
Last Updated: July 24, 2009 00:29 EDT
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