Woodside expects Qatar to target new LNG buyers with supply wave

By Perry Williams on 8/16/2017

SYDNEY (Bloomberg) -- Woodside Petroleum, Australia’s largest liquefied natural gas producer, expects rival Qatar to target the emerging markets of India and Pakistan with a new wave of supply next decade and not cannibalize traditional Asian buyers.

The Gulf nation plans to boost annual LNG production to 100 million metric tons by 2024 from 77 million tons now, Saad Sherida Al Kaabi, CEO of state-owned Qatar Petroleum, said in June. That’ll be soaked up without damaging the traditional supply base of South Korea, Japan and China, Woodside CEO Peter Coleman said on an earnings call Wednesday.

“We expect the Qataris will target a different market,” he said. “A lot of it will actually go to Pakistan and India as they start to re-establish their relationships there.”

Woodside plans to deliver additional volumes of LNG into Asia by the mid-2020s from its Browse and Scarborough natural gas fields offshore Western Australia. It hopes to accelerate its long-stalled gas resource Browse in 2018, potentially piping the gas back through either the North West Shelf or Pluto plants. Progress will not be easy given Woodside will need to get all the Browse venture partners on board, Sanford C Bernstein & Co. analyst Neil Beveridge said in a research note Wednesday.

Woodside expects a supply gap to develop mid-next decade and that presents an opportunity. “The Qataris are talking about 23 million tons a year but China and Pakistan have grown by that amount this year alone,” Coleman said in a phone interview.

Qatar Petroleum didn’t immediately respond to a request for comment.

Sanford C. Bernstein said in May more than two-thirds of LNG projects chasing to fill an expected supply gap in the mid-2020s are unlikely to be built. Of those that do proceed, Coleman expects competition to come from Papua New Guinea, Russia and the U.S. Gulf Coast. More high-cost projects from Mozambique and Canada, where Woodside hopes to eventually develop the Kitimat LNG facility, will likely be delayed later next decade.

Profit Rises

Woodside earlier posted a 49% increase in first-half profit amid higher energy prices and lower production costs. Net income rose to $507 million from $340 million a year ago, the Perth-based company said Wednesday in a statement. That beat an estimate of $452 million from UBS Group analyst Nik Burns. The result was buoyed by a 6% fall in production costs to $4.90/boe.

Woodside, which operates the Pluto and North West Shelf liquefied natural gas projects in Western Australia, reported last month its first-half output had declined to 42.2 MMboe on revenue of $1.76 billion.

The Perth-based company expects first production in September from the Chevron-operated Wheatstone LNG plant where it owns a 13% stake. The two companies may also team up on the Woodside-operated North West Shelf plant where Chevron could be offered a tolling opportunity for its equity gas, Macquarie Group said on June 30.

Woodside expects Brent oil to average $55/bbl in 2017, moving up to $65/bbl next year as the market begins to rebalance. Crude has averaged about $52/bbl this year compared with about $45 in 2016.

Shares in the company rose 2.6%, the biggest gain since December, to A$29.90 at the close in Sydney.

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