The Woodside Petroleum Ltd.-led Browse LNG joint venture has decided to indefinitely defer the development following the completion of the front-end engineering and design (FEED) process (OGJ Online, Dec. 10, 2015).
The decision has come after consideration of the current economic and market environment.
Woodside noted that since starting the FEED process, it has been focused on delivering targeted cost savings and value enhancements. Significant progress had been made to improve the project’s value, but it was offset by the very challenging and unfavourable external environment.
Nevertheless, Woodside Chief Executive Officer Peter Coleman said the company remains committed to “the earliest commercial development of the Browse resources and to floating LNG as the preferred development concept.” He also did not discount the possibility of a completely different development option, such as piping gas to the Burrup Peninsula facilities currently serving the North West Shelf fields. Coleman added that the economic environment is not supportive of a major LNG investment at the moment.
The announcement comes as no surprise to industry watchers who point out that deferral of Browse is the biggest local casualty of the plunge in oil prices.
It also is a blow to the Western Australian resources sector with Premier Colin Barnett admitting that it would have been very difficult for the JV to commit “probably north of $50 billion (Aus.)” to develop Browse LNG when the price of petroleum, including natural gas, is low. Barnett hoped the project would get its opportunity when prices recover in a few years’ time.
In making the announcement, Coleman said the Browse delay gave Woodside headroom to pursue acquisition of assets that were beginning to come onto the depressed market. He signalled that they would take priority over returning capital to shareholders.
Coleman added, however, that new petroleum supply projects like Browse would have to get moving within 2-3 years to meet the forecast demand.
The Browse project has been deferred several times, including April 2013 when the joint venture cancelled plans for a large onshore LNG plant at James Price Point in the Kimberley that would have cost in excess of $80 billion (Aus.) (OGJ Online, Apr. 12, 2013). Billions of dollars have already been spent in trying to commercialize the Browse gas fields, which were originally discovered in the 1970s.