Woodside buys into Scarborough gas field

Woodside Petroleum Ltd., Perth, has purchased a portion of BHP Billiton Ltd.’s interests on the Exmouth Plateau, offshore Western Australia, including the yet-to-be-developed Scarborough gas field, for $400 million.

The deal also includes some of BHP Billiton’s interest in nearby permits containing the undeveloped Thebes and Jupiter gas fields.

Scarborough, discovered by ExxonMobil Corp. and BHP Petroleum in 900-970 m of water in 1979, is covered by two retention leases: WA-62-R and WA-1-R. Woodside has acquired 25% of WA-1-R and 50% of WA-62-R.

Jupiter field was originally discovered by Phillips Petroleum Co. in 1979 and is now held in retention lease WA-61-R. Woodside has acquired 50% of this permit.

BHP Billiton found the smaller Thebe field in 1,173 m of water 50 km north of Scarborough in 2007. It is held in retention lease WA-63-R. Woodside has acquired 50% in this permit.

Woodside will become operator of WA-61-R, WA-62-R, and WA-63-R. ExxonMobil will retain operatorship of WA-1-R, which contains the bulk of Scarborough field.

Overall total resources for the three fields has been estimated at 8.7 tcf of gas on a 2C confidence level. Woodside’s share is an estimated 2.6 tcf. No further appraisal work is scheduled.

All the discoveries are 220-250 km northwest of the town of Exmouth on the Western Australian coast.

Under the terms of the acquisition, Woodside will pay BHP Billiton an upfront amount of $250 million and a further $150 million contingent upon a final investment decision to develop Scarborough.

The acquisition is subject to preemption rights, foreign investment review board clearance, and National Offshore Petroleum Titles Administrator approval and registration.

Completion is expected by yearend.

The Australian government renewed the retention lease over the Scarborough area fields in November 2015 for 5 years when the then ExxonMobil-BHP Billiton joint venture pledged to spend about $250 million (Aus.) to move the proposed Scarborough gas development to an FID.

Due to its remote location, deep water, and the lack of accompanying liquids, the companies had struggled to design a viable development concept. The dip in world oil prices exacerbated the problem.

The preferred option was a $10-billion floating LNG (FLNG) scheme, but the alternative of piping the gas to either the North West Shelf project or the Pluto project, both operated by Woodside Petroleum, with LNG trains on the Burrup Peninsula, had not been ruled out.

The retention leases were granted last year on condition that front-end engineering and design is completed before the expiry date in 2020 or the government would strip the companies of ownership. It is not known if this condition still applies with the change of ownership.

Initial plans for the FLNG facility included a 495 m-by-75 m vessel with a capacity for producing 6-7 million tonnes/year of LNG. The field life is expected to be 25-35 years.

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