LNG

Woodside Energy, the operator of the Northwest Shelf LNG project and Pluto LNG in Western Australia, has completed the sale of a 10 percent non-operating participating interest in the Scarborough Gas joint venture for US$910 million to the LNG Japan group.

The completion follows Woodside’s announcement in August 2023 that it had established a strategic relationship with LNG Japan that involved equity in the Scarborough project, potential LNG offtake and collaboration on opportunities in new energy.

“The sale proceeds received by Woodside of US$910M for equity in the Scarborough Joint Venture comprise the purchase price, reimbursed expenditure and escalation,” said Woodside in a statement.

Trading houses

Woodside’s sale and purchase agreement is with a jointly owned subsidiary of LNG Japan, which is a 50-50 joint venture between two Japanese trading houses, Sumitomo Corp. and Sojitz Corp., and a Japanese state-owned agency called the Japan Organization for Metals and Energy Security (Jogmec).

The Scarborough gas field project comprises the Pluto Train 2 joint venture and modifications to Pluto Train 1 to process Scarborough gas.

The venture includes the Scarborough field itself and associated offshore and subsea infrastructure.

The Scarborough field is located 375 kilometres (233 miles) off the coast of Western Australia and the reservoir contains less than 0.1 percent carbon dioxide.

Scarborough gas will be processed at the Pluto LNG facility, where Woodside is currently constructing a second liquefaction Train .

In addition to the sale of a 10 percent non-operating participating interest to Japan LNG, Woodside additionally stated in February 2024 that it had entered into an SPA with the largest Japanese LNG importer and power company, JERA Co. Inc. for a 15.1 percent non-operating participating interest in Scarborough.

Commitment

“LNG Japan’s commitment to the Scarborough Joint Venture is a demonstration of the value our customers place on gas as a long-term source of energy as they navigate the energy transition,” said Woodside Chief Executive Meg O’Neill.

“Completion of the sale to LNG Japan is a significant milestone as we progress toward first LNG cargo from Scarborough targeted in 2026,” O’Neill stated.

“We are also pleased to welcome Japan Organization for Metals and Energy Security’s equity investment,” the CEO added.

“Jogmec’s support reflects the contribution Scarborough gas will make to Japan’s energy security,” she added.

Woodside still holds a 90 percent interest in the Scarborough venture and will remain as operator.

Following completion of the transaction with JERA Woodside’s interest will be 74.9 percent in the Scarborough venture.

After completion of the JERA deal, Woodside estimated that as of 26 March 2024, the Perth-based company’s Scarborough field proved (1P) undeveloped reserves are reduced by 128.7 million barrels of oil equivalent to 1,158.3 million barrels of oil equivalent.

Woodside Petroleum, the Australian oil and gas company and LNG operator, has received final approvals for the pipeline to shore and for the field development plan Scarborough Gas project to underpin the Pluto LNG expansion in Western Australia.

Woodside, the Australian LNG plant operator, has completed the sale of a 49 percent non-operating participating interest in the second Pluto LNG train under development to Global Infrastructure Partners (GIP), one of the world’s leading specialist energy infrastructure investors.

US energy and LNG engineering company McDermott International has been awarded a contract by Australian export plant operator Woodside to develop the Scarborough gas field in Western Australia for Pluto LNG.

Woodside Petroleum, the Western Australia operator of the North West Shelf and Pluto LNG plants, said it was keeping up production levels as demand has remained strong in its core north Asian market and its trading team has started trading spot shipments with Chinese buyers.

The Perth-based company said its base business was characterised by reliable, low-cost, high-margin operations which provide resilience to fluctuations in commodity prices.

“LNG and oil production have not reduced in the current environment, and deliveries to customers have continued,” said the company.

“Woodside has a high-quality, investment-grade customer base, and deliveries and performance under contracted arrangements have not been adversely impacted by recent events,” said Woodside.

It outlined its actions over the combined coronavirus and oil and LNG market gluts actions as being aimed at protecting local communities and the health and safety of its people and contractors while deferring some projects and spending.

“Demand has proven resilient for Woodside’s product in core north Asian markets. Woodside’s trading team has recently begun placing some spot production back into China as industrial output and demand restarts,” said Woodside.

“This trading capability, along with Woodside’s shipping capacity, provides flexibility to respond quickly to changes in market dynamics,” it added.

Woodside expected to see full impact of lower oil price late in the second quarter of 2020 due to the lag between the oil price and realised LNG price and was increasing hedging activities.

“The oil price is expected to be volatile at least in the near-term. To reduce exposure to potential further downside and increase revenue certainty, Woodside has hedged 11.85 million barrels of oil between April and December 2020 at an average price of US$33.47 per barrel,” said the company.

“Woodside has also agreed with a customer (unnamed) to fix the price of approximately 2.4 MMboe of LNG production over the same period, to further increase revenue certainty,” it added.

Because of the changed market and the drop in commodity prices and exchange rate issues, Woodside said its 2020 work plan had been reviewed and non-essential activities have been cancelled or deferred. 

“Total expenditure in 2020 is forecast to reduce by approximately 50 percent to approximately $2.4 billion,” said the company.

The company has delayed final investment decisions on the Scarborough and Pluto LNG Train 2 developments until 2021as will as target investments in the Browse Basin, offshore northwest Australia.

“Finalisation of commercial agreements and regulatory approvals will continue for Scarborough, Pluto Train 2 and Browse and there will be some ongoing engineering work in preparation for final investment decisions,” explained Woodside.

It also gave an update on its plans for the oil-led project offshore Senegal in West Africa.

“Work on the Sangomar Phase 1 development commenced early in 2020. Woodside is taking early action to proactively manage the emerging impacts of COVID-19 on the supply chain and project schedule,” said Woodside.

"We are working with contractors, the Government of Senegal and our joint venture partners to evaluate options to reduce total cost and near-term spend whilst protecting the overall value of the investment,” it added.

The company is also making efforts to maintain high production levels by deferring planned maintenance on natural gas facilities LNG Trains.

It made changes to the planned turnaround schedule at the Karratha Gas Plant with the major turnaround for LNG Train 3 deferred to September 2020 and the major turnaround for LNG Train 4 deferred to August 202.

Woodside has also delayed most proposed exploration activities, although some seismic acquisition will continue, reducing overall exploration expenditure by around 50 percent to $75 million.

On the hiring front. Woodside said employee numbers had been frozen but its intake of graduates would continue.