Woodside Petroleum says talks with other gas owners about buying volumes to underpin an expansion of its Pluto liquefied natural gas project in Western Australia are edging closer to completion.
KEY POINTS
- Woodside progressing East Timor talks on Sunrise
- Negotiating to buy more gas for Pluto expansion
- Net profit falls 8.1 per cent, revenue up 7.2 per cent
Woodside Petroleum says talks with other gas owners about buying volumes to underpin an expansion of its Pluto liquefied natural gas project in Western Australia are edging closer to completion.
Woodside has for some time said it does not have enough of its own gas for a stage two Pluto development and has sought to buy gas from other producers in Western Australia's Carnarvon Basin.
It has been suggested that the remote Scarborough field owned by ExxonMobil and BHP Billiton could be fed into a second LNG processing "train" at Pluto.
Woodside chief executive Peter Coleman said talks with other gas owners were "active and maturing".
"We are pleased with the progress of those particular discussions," Mr Coleman told a teleconference on Wednesday.
Woodside continues to strive to find more gas on its own permits for the expansion.
"We continue to build volumes, but we just don't have enough yet," Mr Coleman said.
"We're not simply chasing gas for gas' sake - we want to make sure each and every decision truly does add value and is economically justified in its own right."
The first stage of the Pluto project, near Karratha, has been beset by delays and cost blowouts and is currently slated to deliver first gas in March next year.
Woodside previously planned to order long lead-time items for an expansion train in the middle of 2011 to achieve the earliest start-up, but this has been held off.
"We are progressing the business case for those expansion options," Mr Coleman said.
"We haven't reached a decision point yet on ordering long lead items for an expansion train."
He said Pluto was poised to change Woodside's revenue stream for many years to come.
"Pluto is and remains an attractive project underpinned by 15-year sales contracts and of course we have some uncontracted volumes as well, which gives us opportunity to expand."
Mr Coleman also said today he would meet with the Timor Leste government "in the not too distant future" to discuss the stalled Sunrise liquefied natural gas development.
The relationship between the parties has been increasingly strained, with Woodside earlier this year saying the Timor Leste government had ignored requests for talks.
East Timor wants a processing plant built on its shores, but Woodside is sticking to a floating vessel concept.
"I'm hoping for a re-establishment of earlier relationships," Mr Coleman said.
"We hope to get dialogue going again ... to really understand where we have differences."
Despite the stalemate, Mr Coleman said there were "far more things we agree on than we don't agree on".
But he stopped short of saying Woodside would reconsider the onshore processing option.
When Mr Coleman took the helm in May, he ruled out the energy giant revisiting the onshore development concept.
"I think it's too early for us to move away or even have discussions on a different development concept for Sunrise," Mr Coleman said on Wednesday.
"It just starts to cloud discussions and confuse.
"We, as a joint venture, really do believe that we have the right development concept that is consistent with the requirements we have, which is good oil field practice.
"Before we start going down the path of saying `My idea is better than your idea', the first thing to do is establish a relationship, establish one where we can sit in a room together and thrash out these issues."
Meanwhile, Woodside announced today its first half net profit was down 8.1 per cent, but the company says it has a strong cash position on higher revenue and increased underlying profit.
Net profit fell to $US828 million ($A792 million) for the six months to June 30 2011, from $US901 million for the same period a year earlier, Perth-based Woodside said in a statement on Wednesday.
The strong first-half in 2010 was due largely to the company's gain on the sale of its Otway assets.
Revenue was up 7.2 per cent to $US2.2 billion ($A2.1 billion), even though the company reported lower sales and production levels in 2011.
Woodside's interim dividend, fully franked, will be US55 cents per share, with a record date of August 26.
The increase in revenue was due largely to the higher commodity prices, the company said in a statement on Wednesday.
However, sales were down 11.9 per cent, compared with the comparable period in the prior year, and production was down by 13.1 per cent, primarily as a result of planned maintenance and project outages, but cyclone interruption had played a part.
Capital expenditure, at $US1.5 billion, was down six per cent in the first half of 2011, driven largely by lower expenditure at the Pluto liquefied natural gas (LNG) foundation project.
The Pluto LNG project, projected to cost A$14.9 billion, is expected to deliver its first gas cargo in March 2012.
Woodside's 2011 production target is 62 to 64 million barrels of oil equivalent.
Production volumes are expected to increase strongly after Pluto comes on line.
Shares in Woodside fell three cents to $37.29 by 1145 AEST.
