Perth-headquartered Woodside has moved to put offtake volumes behind its planned Pluto LNG expansion—a project competing in the crowded field of new liquefaction projects targeting a mid-2020s start-up—by inking a heads of agreement (HoA) for post-2020 supply with German gas supplier Uniper.
And, while he is “always” conscious of the risks of oversupply in an LNG market where others are moving to FID, the firm’s CEO Peter Coleman is a sanguine mood. “The industry is going to do what the industry is going to do,” he says. And given that there is “not an orderly process” around projects, “if we sit on the sidelines, we will just watch others move forward”.
As long as Colman has an investable project that delivers an acceptable return to his shareholders, he feels he can proceed on that basis. For Pluto 2 the cost base is right, the key factor is getting the execution right, he says.
And Pluto 2 “will beat a Gulf Coast project every day of the week”, in Coleman’s view, because of the higher cost base of projects that have gone down a Henry Hub and liquefaction model. “My processing costs are sunk, because I have made the upfront investment,” he says.
The agreement with Uniper foresees the firms sealing a 13-year LNG sale and purchase agreement (SPA) for 0.5mn t/yr from 2021, rising to 1mn t/yr in 2025. The volume increase is dependent on Woodside taking FID on its Scarborough gas discovery, which will underpin the firm’s Burrup Hub strategy and the expansion of Pluto LNG.
Woodside’s Burrup Hub initiative aims to exploit both the Greater Scarborough fields, with estimated reserves of 9.2tn ft³ and the 13.9tn ft³ Browse discovery to both extend the life of the North West Shelf Venture LNG plant and add 4-5mn t/yr to Pluto LNG from 2024.
The Scarborough/Pluto 2 project is “going well”, says Coleman, with the firm making progress on government approvals and closing in on having project costings by the end of the year. Discussions with Anglo-Australian producer BHP on the tolling agreement for its 25pc share of Scarborough are also proceeding, he says. And, as the Uniper deal illustrates, “marketing is well advanced”.
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