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Browse off the Shelf and back on Woodside’s LNG agenda

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April 3, 2017

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Woodside Petroleum chief Peter Coleman says the company can double the life of the nation’s biggest and oldest LNG export plant — the North West Shelf at Karratha — at a competitive price by piping gas 900km from the Browse gas joint venture, where studies on a $40 billion Browse floating LNG development were ditched last year.
The plan has now overtaken floating LNG as Mr Coleman’s preferred development plan.

It brings studies of a long-awaited Browse development full circle from eight years ago, when then Woodside chief Don Voelte led the Woodside-operated Browse venture to drop the Shelf plans and instead investigate an LNG plant at James Price Point near Broome.

When that plan was dropped in 2013, after an $80bn development estimate, a floating LNG path using Shell technology was then investigated. That was ­officially dropped early last year.

“We’re looking at a big opportunity to basically double the life of the North West Shelf and we will do that by bringing Browse into it,” Mr Coleman told The Australian. “For the first time since I’ve been with Woodside, I’m looking at a development concept for Browse that I am very excited about.”

He said the Scarborough field, in which Woodside bought a 25 per cent stake from BHP Billi­ton last year, could also be developed through the 28-year-old North West Shelf or through the Woodside’s neighbouring Pluto LNG project. Woodside operates Browse on behalf of a joint venture that includes Shell, BP, the Japan Australia LNG joint venture between Mitsui and Mitsubishi and PetroChina.

“Broadly, the Browse joint venture partners are behind us in pursuing this and we are going to work really hard this year to see if we have a project doing it this way,” Mr Coleman said.

The Browse project consists of three big gasfields in the Browse Basin off WA: Torosa, discovered in 1971, Brecknock, discovered in 1979, and Calliance, discovered in 2000. Together, they contain contingent resources of 16 trillion cubic feet of gas and 466 million barrels of oil.

But development has been stymied by rising costs during the boom, falling oil prices and clashes between joint venture partners.

In August, Mr Coleman said a pipeline to Karratha would be looked at again but last month told analysts that it had not overtaken floating LNG as the base case for Browse.

Now he says delays to developing the fields mean the timing is more favourable for development through the Shelf, which needs more gas in the mid-2020s. Low oil prices also mean the partners are much more focused on capital efficiency than previously, when oil prices were above $US100 a barrel.

“When you look at efficient use of capital, it really points you to the North West Shelf and says ‘do it’,” Mr Coleman said.

While the Browse partners are apparently on the same page, a major hurdle will be getting the six North West Shelf partners, only some of whom are in Browse, in alignment.

The North West Shelf is owned by Woodside, Shell, BP, Japan Australia, Chevron and BHP Billiton. Both Chevron and BHP were Browse partners but sold out as development looked less likely and, when James Price Point in the Kimberley region was being investigated, more environmentally sensitive. BHP also still owns 25 per cent of the Scarborough gasfield joint venture. “The agendas are all aligned in the Browse joint venture but we have one big hurdle to get over, and that is working with the North West Shelf joint venture and getting alignment around risk sharing,” he said.

“The opportunity there is a tremendous one. We all know what it is, so I’m confident we’ll get a resolution and Woodside is the operator of both ventures, so we will have to lead the way.”

If the studies progress and alignment can be reached, Mr Coleman is targeting an official concept selection in 12 months. If the Shelf partners come on board, this would be followed by major engineering studies, known as front end engineering and design which are likely to cost hundreds of millions of dollars.

First gas would be expected to enter the North West Shelf plant in 2025 or 2026 and would underpin between 10 million and 12 million tonnes of LNG exports a year. This would also coincide with a gap in market demand, Mr Coleman said.

Backing the concept is increased confidence in long pipelines, following the completion of the Ichthys pipeline from the Browse Basin to Darwin.

There was also the chance to use floating gas storage facilities at the Browse fields — the size of regular ships rather than the big floating LNG platforms previously planned — would avoid the need for fixed infrastructure.

“There’s nothing outside of the design envelope, which is why I’m more comfortable,” Mr Coleman said. “The last two concepts had a lot of new technology and was always the biggest, so you always felt a bit uncomfortable about what you didn’t know.”

Mr Coleman would not be drawn on estimated development costs. “It’s very competitive,” he said. “It’s much cheaper (than floating LNG) and much quicker to market.”

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