Woodside Petroleum has held out the hope of proceeding with an alternative gas project in the Kimberley after spiralling costs forced it to terminate plans for a gas processing plant at James Price Point near Broome.
The cost of the contentious James Price Point option had risen to a reported $45 billion, though Woodside did not release any estimates.
Woodside told the ASX today it would evaluate three alternative development options: a floating liquefied natural gas (LNG) plant, piping the gas to existing LNG plants in the Pilbara, or building a smaller LNG facility near James Price Point with its joint venture partners.
Joint venture partner Royal Dutch Shell prefers a floating LNG facility similar to its $12 billion Prelude project, which is currently under construction.
Premier Colin Barnett told ABC Radio this morning that WA would still receive a significant benefit from royalty payments if the Browse gas was processed offshore, but it would be a tragedy and missed opportunity if the gas does not come onshore.
Mr Barnett said his preference was for a smaller facility to be built near James Price Point to ensure the creation of local jobs, but was resigned to the fact that floating processing was the most likely outcome.
Woodside chief executive Peter Coleman said in an interview released to the ASX that the company does not anticipate any significant write-downs as a result of the decision not to proceed.
Mr Coleman said the company would not discuss publicly the capital costs or commercial terms used to make the decision, but said the project's cost escalation was consistent with other large Australian resources projects.
Mr Coleman also said the decision was purely commercial and not influenced by environmental or red tape issues.
“While we have seen an increase in both the environmental and administrative compliance requirements and procedures, Woodside is committed to the very highest standards in those areas,” he said.
“We have diligently worked through those requirements while we've assessed the James Price Point option.”
While Mr Coleman would not reveal exactly how much had been spent to date on the James Price Point plan, he said the “considerable resources” was money well spent.
“To create an understanding of the development options we'll be using a lot of the work to date to assess other development options,” he said.
Australian Manufacturing Workers’ Union state secretary Steve McCartney said today’s decision was a devastating blow for WA’s construction and manufacturing sector.
Mr McCartney said the James Price Point plant would have employed around 8000 construction workers, with only a few hundred jobs to be created by floating LNG.
“The biggest winners will be steel fabricators in South Korea and China, as local fabricators will not get a look in to build the facility,” he said.
“If a FLNG facility is allowed to proceed, the state and federal governments will be remembered for selling our resources off to the lowest bidder with no consideration for local benefits and local content.”
The proposed James Price Point facility was to be built in an area with one of the largest collections of dinosaur footprints in the world, angering Broome locals and environmentalists.
The Broome Community No Gas Campaign cautiously welcomed Woodside’s announcement, but said it would continue to work to ensure there would be no onshore gas developments at James Price Point.
“All the environmental, cultural and social reasons that we opposed the precinct remain, so our opposition will not cease until we are sure that the James Price Point area – the monsoon vine thickets, the dinosaur footprints and the cultural heritage sites – are all protected,” campaign spokesperson Nik Wevers said.
“This means plans to compulsorily acquire the land or build a port at the site even if the LNG precinct does not go ahead must be shelved.”
Woodside shares had risen by 3.46 per cent, or $1.29, at 9:25AM, WST.
