Woodside defers Scarborough, Browse

Woodside Petroleum will delay investment decisions on the Scarborough and Browse LNG developments after a big fall in oil prices amid the escalating COVID-19 pandemic, but three projects under way will continue.

A decision on the $US11 billion Scarborough gas tieback to the Pluto LNG facility near Karratha has been pushed back from this year until 2021.

Work on approvals, commercial opportunities and engineering will continue for Scarborough, Woodside chief executive Peter Coleman told analysts.

A positive effect of the pressure in the market was that costs would be much tighter, Mr Coleman said.

The deadline for Browse has been moved back, and Mr Coleman did not give guidance as to when a decision on the project, already delayed, would be made.

Front end engineering and design will not get under way this year, and Business News understands FID is unlikely before 2022.

Construction of the Sangomar phase one development in Senegal will continue despite the pandemic taking hold there, although the company will be scaling back to ensure safety.

Similarly, the small Pyxis Hub project, connected to Pluto, and the Julimar-Brunello Phase two development linked into the Chevron operated Wheatstone LNG, are continuing.

Woodside said it would cut spending by 50 per cent to $2.4 billion, with a major turnaround of Karratha gas plant train three to September, and of train four until August 2021.

Exploration spending will be reduced by 50 per cent to $75 million.

Despite the spending cuts, production guidance remained at about 97 million to 103 million barrels.

Mr Coleman the circumstances were unprecedented wend impacting across the industry.

“Our immediate priorities have been minimising the risks from COVID-19 to staff, contractors and the communities where we operate, and maintaining our ability to deliver gas to the Western Australian and overseas customers who depend on us,” he said. 

“We are also responding to the lower, more volatile oil price environment by taking difficult but prudent decisions to reduce our expenditure for this year and to delay targeted final investment decisions on our growth projects at Scarborough, Pluto train two and Browse.

“These are extraordinary times, that no one could have foreseen, but Woodside enters this period of significant uncertainty with one of the stronger balance sheets in our industry and world-class, low-cost producing assets, which are resilient to commodity price fluctuations.

“Our disciplined approach to cash flow and debt management has positioned us to respond quickly and decisively. 

“The measures we are implementing will preserve cash during these challenging months and ensure that in the longer term we can successfully execute the growth strategy we have in place. 

“The development of the Scarborough and Browse gas resources through Woodside’s proposed Burrup Hub remains among the world’s most cost-competitive LNG investment opportunities and one which will provide significant economic returns to shareholders, governments and communities for decades to come.”

Shares in Woodside dropped 6.4 per cent to $16.84 by the close of trading.