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Delay looms for Browse LNG

The West Australian, 1st July 2009, 6:00 WST

Woodside Petroleum’s aim to have agreed by last night on a location for the Browse Basin project with its four joint venture partners has failed amid increasing concern the $25 billion liquefied natural gas project may be delayed indefinitely.

Just over six months after Woodside Browse boss Betsy Donaghey said a site selection by “the first half of next year is something we would really try to achieve”, yesterday’s non-binding deadline went without resolution.

Woodside insiders say they are ready to start costly front-end engineering and design studies for an LNG development at James Price Point north of Broome, such is their commitment to the Kimberley site. But Woodside’s multi-national partners are far from convinced, and more excited about using the North West Shelf’s infrastructure near Karratha.

Their indecision means Woodside’s proposed timetable for the project, which if developed as a greenfields site in the Kimberley is likely to cost $25 billion, is drifting fast and threatening Woodside boss Don Voelte’s much-hyped aim to build an LNG train every two years.

A Woodside spokesman said yesterday the joint venture would choose a site “later in 2009”, or almost a year later than Mr Voelte had anticipated.

“This will provide sufficient time to evaluate the Kimberley LNG precinct and to progress work associated with both options,” he said. But wary of more wrangling with the Kimberley Land Council and environmental groups vehemently opposed to development in the region, Woodside’s partners are instead eyeing the Browse gas as refill when reserves at the NWS gradually run low, or in about 10 years.

Piping the gas from the Browse Basin to Karratha would also come at a much lower cost than a greenfields site at James Price Point, a vital consideration in particular for Woodside partners Chevron and Royal Dutch Shell, who between them own 75 per cent of the rival Gorgon project.

Gorgon’s cost is tipped at $50 billion, leaving Chevron with a $25 billion bill, Shell with $12.5 billion and ExxonMobil with $12.5 billion. Chevron is also planning the whollyowned Wheatstone project, which could cost $25 billion and exhaust its capital budget for the region.

BHP Billiton, meanwhile, is facing a big bill from the proposed development of the half-owned Scarborough LNG project near Onslow while BP has huge regional commitments, in particular in Indonesia.

For all of them, developing Woodside Browse will only incrementally boost LNG output, making it harder to justify another expensive project.

For Woodside on the other hand, as 50 per cent owner and operator of the Browse project, a development would be company-defining and bring with it a legacy of having generated a much-needed boost for the Kimberley’s indigenous population.

Not surprisingly, Woodside is urging State and Federal governments to exert pressure on its Browse partners to ensure the project is developed fast.

Chevron said last night it supported “the responsible development of the Browse fields without delay” and said a decision would be made “when all of the options … are fully explored”.

Shell, which is also working on a floating LNG plant for its Prelude field, was equally non-committal.

“Given the complexity, scale, challenges and expected cost of this development, Shell believes it is critically important Browse LNG is progressed in a prudent and responsible manner,” a spokeswoman said.

PETER KLINGER