Page 10 - GLNG Week 13

GLNG AUSTRALASIA GLNG
Woodside postpones FIDs on LNG projects amid downturn
INVESTMENT
AUSTRALIA’S Woodside Petroleum has announced a number of steps it is taking in response to the oil and gas market downturn that has resulted from an oil price war and the impact of the coronavirus (COVID-19) pandemic. The measures include postponing final investment decisions (FIDs) on three LNG projects – the Scarborough offshore gas development, Browse LNG and Train 2 at the existing Pluto LNG facil- ity. The deferrals come as no great surprise, with analysts having already identified the projects in question as being at risk of delay from the market downturn.
The deferrals come as Woodside reduces its planned spending for this year roughly by half, to $2.4bn. Within this, capital expenditures are being cut by 60% to $1.7-1.9bn, while oper- ational spending is being sliced by $100mn. Woodside’s spending cuts are proportionately larger than those announced by certain leading national oil companies (NOCs) and super-ma- jors, with Royal Dutch Shell and Saudi Aramco slashing their spending by 20%.
A Bernstein Research analyst, Neil Bever- idge, said the cuts were larger than he expected. Woodside has “one of the most defensive balance sheets among Asia-Pacific [exploration and pro- duction companies] to ride out the oil price war,” he commented.
FIDs for Pluto Train 2 and Scarborough are now predicted to be announced in 2021 instead of this year. Speaking on a conference call, Woodside’s CEO, Peter Coleman, did not specify when an FID on Browse would now be expected. The company had previously suggested an FID on the AUD30bn ($18bn) project could be reached in the first half of 2021.
Together, the three projects account for AUD53bn ($32bn) of deferred spending. They are anticipated to be major contributors to Woodside’s goal of 6% per year growth in output up to 2028.
Coleman said his company would continue finalising commercial deals and regulatory approvals for Scarborough, Pluto Train 2 and Browse. There will also be some ongoing engi- neering work in preparation for FIDs on the projects.
Indeed, some progress is being made despite the deferrals. On April 2, less than a week after Woodside’s announcement, Australian regula- tors approved the initial proposal for Scarbor- ough following an assessment of its potential environmental impact.
Australia’s National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) said it had accepted the offshore project proposal (OPP) for the $11bn
Scarborough development. This is the primary environmental assessment document for the project, which will form the basis for future activity-specific environment plans. Those plans will also need to be assessed and approved by NOPSEMA.
Coleman welcomed the approval. “Although we are now facing challenging market conditions due to the impact of COVID-19 and volatile oil prices, Scarborough is a world-class resource which we plan to develop at a globally competi- tive cost through our proposed Burrup Hub,” he said. “Woodside is continuing work to ensure we have all the necessary regulatory approvals and commercial agreements in place to ensure a final investment decision can be taken for Scar- borough in 2021.”
The Scarborough field will supply gas to Pluto LNG, and indeed the development of the second train at Pluto is designed to accommodate these additional volumes.
Woodside was the second Australian LNG developer to announce last week that it is slow- ing its LNG-related investments in response to the market downturn. On March 23, Santos said it expected to defer an FID on the Barossa gas project, which is key to keeping the Darwin LNG terminal operational, as the main gas field that feeds it is set to run dry in 2022. An FID on Barossa was previously antcipated in the second quarter of this year.
“Given the uncertain economic impact of COVID-19 combined with the lower oil price, we expect to defer FID on Barossa until business conditions improve,” Santos’ CEO and managing director, Kevin Gallagher, said. As yet, however, nobody knows when such an improvement in the market is likely to come.™
The Scarborough field will supply gas to Pluto LNG, and indeed the development of the second train at Pluto is designed to accommodate these additional volumes.
Australian
regulators approved the initial proposal for Scarborough following an assessment of its potential environmental impact.
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w w w . N E W S B A S E . c o m Week 13 02•April•2020