Woodside to unveil Pluto overruns

WOODSIDE Petroleum is expected to reveal the full extent of cost overruns and delays at its crucial $13 billion Pluto liquefied natural gas project by early next week.

Australia’s biggest standalone oil and gas producer stunned investors last month when it revealed the project’s schedule and budget were being reviewed due to the embarrassing need to overhaul Pluto’s flare towers because they did not comply with its own cyclone ratings standard.

With meteorologists forecasting one of the most severe cyclone seasons for northern Western Australia in years, Woodside said it had no choice but to dismantle the flare towers to undertake “corrective action”.

Though Woodside previously indicated it would not be responsible for any cost blowouts associated with the redesign and re-installation of the towers, analysts remain concerned about the potential impact on the timing of revenue from Pluto.

The project was initially expected to export its first gas in the first quarter of next year, but many now expect first gas sales will be delayed until well after the cyclone season ends in April.

They are also concerned at the potential for the delays to add to the already significant uncertainty over Woodside’s immediate outlook.

Just two weeks before the flare tower problems were revealed, Woodside chief Don Voelte announced his plans to retire in the second half of next year, once a suitable successor has been identified.

Then earlier this month, 34 per cent shareholder Shell dropped an even bigger bombshell by selling a 10 per cent stake and declaring itself open to offers for its remaining interest, effectively putting Woodside in play.

The move has sparked widespread speculation on whether Woodside will attract a bid, most likely from BHP Billiton, or whether strategic investors such as Asian gas customers could pick up Shell’s stake.

Against that backdrop of uncertainty, Woodside has adopted a “small target” approach by opting not to hold its annual all-day November investor briefing in Sydney in favour of a conventional announcement on the results of its Pluto review.

Its annual investor day typically includes detailed presentations from the heads of each Woodside business unit.