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Woodside to resume gas hunt to expand $15-billion Australia plant

BY ROSS KELLY

BRISBANE -- Woodside Petroleum said it will restart efforts to find natural gas for an expansion of a flagship Australian export facility early next year, as it doused expectations it may fill a hole in its production growth with a big acquisition.

Woodside, Australia' s biggest oil company by output, behind BHP Billiton, has long led the nation' s push to capture rising Asian demand for clean fuels, operating two of the country' s three existing gas export facilities, and partnering with companies like Shell on discovering new gas fields.

However, a lack of drilling success in recent years, and rising costs, means the Perth-based company is starting to lag rivals in developing new projects. Woodside put an expansion of its $15-billion Pluto gas export facility in Western Australia on ice last year, after it failed to find enough gas nearby, and talks with rival suppliers broke down.

Woodside has hired two rigs to drill in waters near Pluto from early 2014, targeting at least eight natural gas prospects, CEO Peter Coleman said in an interview. The rigs -- for drilling in deep and shallow water, respectively -- are contracted to Woodside for about two years.

Woodside wants to expand Pluto because existing infrastructure makes it cheaper to bolt on extra LNG processing units than starting new developments from scratch. The high cost of new LNG projects was cited by Woodside and partners for the recent decision to abandon plans to develop the Browse gas resource in Western Australia using an onshore plant.

Analysts say the setbacks mean Woodside will struggle to increase its annual production until 2018 at the earliest unless it uses surplus cash to buy rival companies or oil and gas fields already in development.

Coleman said Woodside retains the ability to make a "sizeable" acquisition, despite a recent $500-million cash return to shareholders, and a pledge to pay more of future profits as dividends.

But potential targets currently look expensive, he said.

"When you look at prices and so forth, it' s not clear to me that it' s a good time to be out in the market at all," Mr. Coleman said.

He added that Woodside would only be interested in acquiring willing sellers, and therefore isn' t keen on making hostile takeover bids.

Aware of a looming production plateau, Woodside last year bought some exploration acreage in Myanmar, and agreed to acquire a stake in the massive Leviathan natural gas discovery offshore Israel for more than $1.2 billion.

Leviathan, which contains an estimated 18 Tcf of natural gas, is the world' s largest deepwater gas find in a decade. Its discovery, with other large fields off Israel' s coast in recent years, has potentially set up Israel as an exporter of energy.

Woodside is still waiting for advice from Israel' s government on how much natural gas will be allowed to be exported from the country, holding up the deal' s completion. "They' ve assured us that as soon as their budget' s finalized they' ll put their attention directly to energy policy. So we' re expecting to hear back in weeks, not months," Coleman said.

Woodside has also submitted an expression of interest to develop an LNG plant in Canada, but Coleman said this was a "long-dated" investment option for the company.

Dow Jones Newswires

05/28/2013

 

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