22/11/2021 - 14:58

$16.5bn LNG project to proceed

22/11/2021 - 14:58

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A $16.5 billion plan to develop the Scarborough gas field and Pluto Train 2 has been approved by Woodside Petroleum, the biggest LNG investment sanctioned in WA in a decade.

$16.5bn LNG project to proceed
One processing train already operates at the Pluto facility. Photo: Woodside

A $16.5 billion plan to develop the Scarborough gas field and Pluto Train 2 has been approved by Woodside Petroleum, the biggest LNG investment sanctioned in WA in a decade.

Woodside announced a final investment decision to the ASX after the close of trading today, estimating a cost of $US12 billion, and with gas production expected in 2026.

The project will include development of the Scarborough gas field, which the company estimates has 11 trillion cubic feet of gas.

Scarborough will include 13 wells, a floating production unit, and a 430 kilometre pipeline. 

Gas will be piped to the Pluto LNG processing plant on the Burrup Peninsula, where it will be liquefied at a second LNG train, which will be built.

The plan had been slated for a final investment decision in 2020, but was delayed by COVID-19.

The project's previously announced contractors include McDermott International, Wood Group and Intecsea.

The Scarborough portion of the development is 26.5 per cent owned by BHP, although Woodside will acquire the Big Australian's oil and gas business through a merger announced earlier this year.

The share sale agreement for that merger was also inked today.

BHP also approved a final investment decision for the Scarborough project.

Last week, Woodside announced it would sell 49 per cent of Pluto Train 2 to Global Infrastructure Partners, while a search for a partner to buy part of its stake in Scarborough is ongoing.

In today's announcement, Woodside predicted an internal rate of return of 13.5 per cent, and an all-in supply cost to deliver LNG into north Asia of $5.80 per million British Thermal Units.

The company also lifted its estimate for total reserves by 158 per cent to 2,300 million barrels of oil equivalent.

“Scarborough will be a significant contributor to Woodside’s cash flows, the funding of future developments and new energy products, and shareholder returns," Woodside chief executive Meg O'Neill said.

“This capital efficient development leverages Woodside’s existing infrastructure and our proven expertise in project execution.

"The contracting model, development concept and execution strategy have been designed to reduce cost risk and protect shareholder value."

Ms O'Neill said the Scarborough reservoir contained only 0.1 per cent carbon dioxide, while BHP said it would be one of the lowest carbon LNG sources in the world in operation in 2030.

She said 60 per cent of Scarborough capacity was contracted.

Conservation Council of WA executive director Maggie Wood said the environmental group would continue to campaign against the development.

"Anybody who cares about our environment and the future of our planet will be disappointed and rightly angry that Woodside and BHP are insistent on pursuing this climate destroying development," Ms Wood said.

“However, this is far from over. The coordinated national campaign against Scarborough gas will continue to apply pressure on this development, its investors and its buyers.

“Scarborough is a disaster for our climate; for our iconic marine life and for globally significant Aboriginal heritage on the Burrup Peninsula. It is the single most polluting fossil fuel development currently proposed in Australia.

“At a time when the world is facing up to the dire need to reduce emissions and prevent irreversible damage to our climate, this project is an insult to ordinary Australians who will bear the brunt of future extreme weather events and climate disasters caused by developments like Scarborough.”

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