Woodside Petroleum chief Don Voelte today slammed key terms of a third party gas supply deal struck by rival liquefied natural gas developer Chevron as "stupid".
Woodside Petroleum chief Don Voelte today slammed key terms of a third party gas supply deal struck by rival liquefied natural gas developer Chevron as "stupid".
Chevron last month struck a deal with Apache Energy and Kufpec to supply gas from their Julimar and Brunello fields to Chevron's planned Wheatstone LNG project in return for a 25 per cent interest in the $20 billion venture. Previously, Apache and Kufpec had been in talks to supply Woodside's Pluto LNG project that would have underpinned an expansion of its LNG capacity.
Speaking to reporters today, Mr Voelte questioned the value of the deal to Chevron and said Woodside had deliberately refused to "chase a bad deal".
"We really thought we gave them a compelling offer," he said. "We lost that deal because we as a management team decided not to chase a bad deal.
"We gave them our best offer and they wanted more from us, and another party - obviously Chevron - was prepared to do that."
"I would have done a disservice to our shareholders by doing a deal that didn't have any economic value ... to us. So I'm ambivalent about it."
Mr Voelte was especially scathing of Chevron's agreement to offer Apache and Kufpec 25 per cent equity in all of the Wheatstone LNG facilities, rather than limiting equity participation to individual production trains.
"You're giving away footprint, and that's stupid in my mind," he said. "Where's the value for Chevron in that deal? We can't work it out."
Woodside in comparison, has given up 10 per cent equity in Train 1 at Pluto to its foundation customers, and may offer between 10 and 30 per cent of the proposed second train to third parties or customers. Ultimately, it aims to build five trains at Pluto if it can source sufficient gas to do so. Train 1 is due to start production next year.
Mr Voelte said talks with other third parties such as Hess Corporation - a joint venture partner in one nearby permit - were progressing well but that he remained confident Woodside would itself find sufficient gas in its own permits in the greater Pluto area to support its expansion plans.
"I trust our exploration department, and I'm just fine and dandy waiting for our guys to discover our own gas," he said.
To that end, it has commenced a 20-plus well program over the next 18 months and today announced success at Eris-1 well, where it encountered a 60 metre gas column. It has also previously reported a significant gas discovery at the Martell-1 well in a permit owned jointly with Hess.
Mr Voelte also cautiously welcomed amendments proposed for the Government's Carbon Pollution Reduction Scheme as a condition of support from the Malcolm Turnbull-led coalition, which are still being fiercely debated by Liberal and National MPs.
The changes propose to give LNG projects concessions for at least 50 per cent of their carbon dioxide emissions, as part of a $7 billion package to alleviate the impact of the scheme on important high emission industries.
Mr Voelte said he was yet to examine the detail of the proposed amendments, but believed they had addressed some issues of concern to the LNG industry.
He added that the government had given Woodside and other LNG producers "a good hearing" regarding their concerns over the scheme.
