LNG

Woodside Petroleum, the operator of two liquefied natural gas export plants in Western Australia, posted 63 percent higher second-quarter revenues of US$1.32 billion compared with US$805 million in the same period last year as Asian LNG demand surged and prices increased.

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Australian Industrial Energy and two Japanese partners building the first Australian liquefied natural gas import terminal at Port Kembla to bring in shipments of LNG for the state of New South Wales by 2020 have received their first firm order at oil-linked prices.

AIE, part of the Minderoo investment and mining group, has joined with Japanese companies Marubeni Corp. and JERA Co. Inc. to develop an LNG import facility near Sydney to make up domestic natural gas shortfalls during peak demand periods on the southeast Coast.

The Port Kembla floating import terminal joint venture said the first order had come from EnergyAustralia, the nation’s third-largest utility.

Port Kembla is an existing industrial cargo port with man-made breakwaters about 100 kilometres south of Sydney in the Illawarra region.

The Port Kembla terminal will initially handle around 2 million tonnes per annum of LNG.

AIE said it had agreed to supply 15 petajoules a year of natural gas, or around 400 million cubic metres, to EnergyAustralia over five years starting from January 2021 at oil-linked prices.

Analysts said this was more lucrative for the sellers at a time of solid oil prices over $70 a barrel rather than natural gas benchmarks such as the Henry Hub used in US LNG sales deals.

“It’s an agreement that provides their business with certainty in the face of increasingly challenging domestic gas market supply,” said Stuart Johnston, Chief Executive of the AIE subsidiary, Squadron Energy.

AIE is seeking to secure customers before making a final investment decision on the A$250 million (US$170 million) project.

The NSW Government has already given planning approval for the AIE-led venture comprising a floating storage and regasification unit (FSRU), a wharf infrastructure and a pipeline to connect to the existing NSW East Coast gas network.

The Port Kembla project believes that once operational, the terminal could supply 70 percent of the state's annual gas demand and help to ease the cost of energy bills for the 33,000 businesses and a million households in NSW that depend on natural gas.

The project is led by the Minderoo group, controlled by Australian billionaire Andrew Forrest.

Marubeni, a long-standing global LNG market participant, is also taking part along with JERA, now the largest Japanese utility company after being formed as part of a merger between many assets owned by Tokyo Electric Power Co. and Chubu Electric.

The choice of Port Kembla was the result of a joint feasibility study launched in February 2018 when the joint venture was first established.

The LNG terminal is regarded as a lower-cost alternative to a proposed Australian inter-state pipeline from West to East at a cost of around A$5 billion.

At least two other LNG regasification ventures are moving forward in NWS and in the southeast state of Victoria.

Woodside Petroleum, operator of two LNG plants in Western Australia and a shareholder in a third facility, posted a 4.4 percent increase in first-quarter sales revenue of US$1.22 billion as higher prices made up for lower volumes caused by cyclone disruptions.

Woodside’s quarterly share of one-sixth of production at the North West Shelf plant it operates amounted to 617,164 tonnes and sold for US$318 million, a decline compared with the 667,332 tonnes marketed in the same three months of 2018.

The NWS cargoes were sold at an average price of US$9.4 per million British thermal units versus US$7.8 per MMBtu in the same quarter of 2018.

The Woodside-run Pluto LNG plant achieved output during the quarter of 1.08 million tonnes, slightly lower than 1.10MT logged in the year-ago quarter, and returned revenues of US$591M.

The Pluto cargoes were sold at an average price of US$10.0 per MMBtu compared with US$9.0 per MMBtu in the same quarter of 2018.

The Perth-based company additionally received 271,826 tonnes of LNG from its share of the Wheatstone plant near Onslow in Western Australia. The Wheatstone LNG revenue came to US$108M.

The Wheatstone cargoes were sold at an average price of US$11.9 per million British thermal units compared with US$8.9 per MMBtu in the same quarter of 2018.

Woodside Chief Executive Peter Coleman said there had been significant progress on plans to develop the Burrup Hub, including a supply accord signed with ENN Group of China that further demonstrated market support for the development of the Scarborough gas resource through an expansion of Pluto LNG.

“Woodside’s revenue increased compared with the corresponding period in 2018 due to higher realised prices. Despite disruption to operations from cyclone activity, our cyclone preparedness ensured safety was maintained and the impact on production was minimised,” explained Coleman.

“The ten-year Heads of Agreement signed in Shanghai with ENN Group is expected to start in 2025 and is evidence of global demand for long-term LNG supply from our proposed Burrup Hub,” said the CEO.

“We are pioneering the development of new domestic markets for LNG in Western Australia. Our new truck loading facility at Pluto LNG was completed in March and will supply LNG for use in remote power generation and transport in the Pilbara and beyond, reducing regional emissions through the replacement of diesel fuel,” he added.

“We also reached a significant milestone in March with the start of domestic gas production at Wheatstone,” stated Coleman.