Woodside looks to oil for funding future development

Published date: 30 August 2021

Share:

Woodside Petroleum's planned merger with the petroleum arm of UK-Australian resources firm BHP would create a more balanced production portfolio between oil and LNG, and provide more choice for future project development, according to the Australian independent.

Oil and LNG accounted for around 70pc of Woodside's revenue last year.

The combined Woodside-BHP petroleum will have an annual combined output of 520,000-545,000 b/d of oil equivalent (boe) or at more than double Woodside's production guidance for calendar 2021 of 90mn-93mn boe (247,000-255,000 boe/d).

"One of the exciting aspects about the merger is that we will be more geographically diverse and the portfolio will be more balanced compared with the LNG heavy position we have today," Woodside chief executive officer Meg O'Neill told Argus in an interview.

"The increase in production, the increased cash flow, the strengthening of the balance sheet really does gives us the ability to exercise quite a bit of choice when it comes to future development. One of the things we will be doing over the coming months is understanding the breath of the portfolio and making some of the decisions on what will be the areas that will be core for us," O'Neill said.

Woodside's LNG interests are spread over its interest in three LNG projects all offshore Western Australia where it is the operator of both the 16.3mn t/yr North West Shelf (NWS) LNG venture and the 4.3mn t/yr Pluto LNG venture and has a 13pc stake in the Chevron operated 8.9mn t/yr Wheatstone LNG venture.

BHP has interests in three oil projects in the US Gulf of Mexico, Atlantis, Shenzi and Mad Dog as well as the Ruby oil and gas project offshore Trinidad and Tobago and has started initial engineering on the Trion oil project in the deepwater Gulf of Mexico that is administered by Mexico.

Woodside has largely relied on its LNG interest in Australia for the bulk of its profits and revenues for the past eight years when it has represented more than 50pc of group revenue over that period. The Perth-based firm has sought to expand beyond Australia and is the operator of the 100,000 b/d Sangomar oil field offshore Senegal, west Africa that is due to come on line from 2023.

Woodside expects the enlarged firm to maintain production around the 520,000-545,000 boe/d level for the subsequent years after the merger is completed, which is expected to be in the April-June quarter of 2022. Sangomar is starting in 2023 and phase two of Mad Dog is starting in 2022 and the final investment decision on the Scarborough gas field offshore Western Australia later this year, O'Neill said. "So production will be roughly 200mn bl/yr give or take a few million. Scarborough is an important contributor to growth over the back end of the five year window," she said.

Woodside also holds interest in exploration permits in South Korea, Myanmar, Canada and the Congo in central Africa as well as the Sunrise gas field in the Timor Sea that is a maritime area jointly administered by Australia and East Timor. Woodside would not comment on what may happen to these interests once the merger is completed.

The merger has allowed BHP to divest its upstream interests that will ultimately reduce its greenhouse gas (GHG) emissions and underline its ambitions to reach net-zero emissions by 2050.

Woodside will have a larger carbon footprint and have a bigger challenge to meet the same target of net-zero emissions by mid-century. It plans to reduce its GHG emissions through carbon offsets and developing a hydrogen and ammonia business.

By Kevin Morrison