Woodside steps on the gas at Pluto

Woodside Petroleum expects to treble production from its Pluto LNG project at the Burrup Peninsula by 2014, after formally starting front end engineering and design work for two additional production trains at the site.

In another huge leap forward for WA's booming LNG sector, Woodside today predicted its Pluto 2 train would start production in 2013, followed by Pluto 3 in the following year. It also said it expected to add two more trains in following years as it identified additional gas or secured supplies from other explorers in the region.

Woodside chief executive Don Voelte said the company's rapid-fire development strategy for Pluto had given it a huge advantage over its competitors and would deliver significant benefits for the company, shareholders and the nation.

"You can understand what an advantage Woodside has ... based on our early industry-leading Pluto decision," he told media and analysts.

"If I may say so myself, it was a gutsy call but it is going to pay off big time, I think."

Pluto's initial production train is over 72 per cent complete and will start production late next year en-route to hitting full capacity of 4.3 million tonnes a year by mid-2011.

Assuming Woodside meets its aggressive development and ramp-up target for Pluto 2 and 3, the project will be producing over 12 Mtpa at least a year before the massive Chevron-led Gorgon project produces its first gas, and two years before Chevron expects to start production at its nearby Wheatstone LNG project.

While Woodside has so far confirmed only sufficient gas to fill the Pluto 1 facility and expects some third party gas to provide feedstock for subsequent trains, Mr Voelte was extremely confident that Woodside's aggressive exploration program in the area would underpin the ambitious expansion program.

The company expects to complete at least 20 wells in the surrounding region by late 2010, and has identified at least 39 major prospects in five "hubs" around Pluto in which it is confident of finding trillions of cubic feet of new gas reserves.

Woodside has notionally allocated between 10 and 35 per cent of Pluto 2 and 3 for third party gas, and has begun negotiations with five companies over potential third party gas feed arrangements.

But Mr Voelte said there was more third party interest than Woodside needed and third party gas would have to meet strict economic criteria if it were to displace any Woodside-owned gas in the production schedule for Pluto.

That excess interest reflected the three-year time advantage Pluto offered to prospective third party suppliers compared to Chevron's Wheatstone project, which will not come onstream until 2016 at the earliest.

Mr Voelte also declared that James Price Point, near Broome, was clearly the best option for the timely development of the huge Browse LNG venture off the Kimberley coast.

While Woodside, which holds 50 per cent of the venture, is a committed backer of the WA government's proposed LNG hub at the site, joint venture partners Chevron and Shell have said the hub is yet to be proven superior to the alternative of piping gas to existing LNG facilities in the Pilbara.

Shell, which owns just 8.33 per cent of the main Browse fields, last month went further by stating it could not be forced to approve any development option that did not meet its economic objectives.

But Mr Voelte said it was now clear that the Pilbara pipeline plan was a sub-optimal fallback option at best.

While onshore development at James Price Point could see full scale production start within seven years, studies had revealed the only viable pipeline option was to provide "backfill" for declining production at the North West Shelf starting in 10-15 years time.

Mr Voelte said it was unthinkable that governments would simply let any minority partner force such a delay.

"We're told by both governments, state and commonwealth, repeatedly that the time for Browse is now, not ten years from now," he said.

"We at Woodside don't think that under the 'use it or lose it' commonwealth retention lease policy, that a minority eight per cent partner will be allowed to cause a 10-year delay in getting Browse off the mark."

Woodside said it hoped to make a final investment decision on the $30 billion-plus project as early as 2011.

It also flagged renewed focus on the Sunrise LNG project in the Timor Sea, for which a preferred development location should be known later this year.

The Sunrise partners are considering either a floating LNG facility at the fields, which extend into the joint development area shared with East Timor, or piping the gas to existing LNG facilities in Darwin.

With such an aggressive LNG development plan ahead of it, Mr Voelte said Woodside could be producing up 20 Mtpa of LNG in its own right by 2020, making it one of the world's leading LNG producers.

Mr Voelte said Woodside's excellent growth outlook had created huge enthusiasm an excitement within the company.

"Frankly, we are having the time of our lives - it doesn't get much better than this," he said.

Earlier, Woodside announced a 12 per cent decline in interim profits to $898 million, reflecting lower oil prices, despite record first proudciton of 40.1 million barrels of oil equivalent (mboe).

It is forecasting full-year output of 81-86 mboe, a production rate Mr Voelte said it could maintain for 22 years "even if we never discovered another molecule of gas".