By Angela Macdonald-Smith and Jesse Riseborough
April 16 (Bloomberg) -- Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, picked a site on the far northwest coast for its Browse LNG project and said it would “strongly” urge its partners to agree to the location.
Woodside’s decision, which follows an A$1.5 billion ($1.1 billion) agreement reached yesterday with Aboriginal groups, means Japan’s Inpex Corp. will have to reassess its choice of Darwin for its $20 billion Ichthys liquefied natural gas project, Western Australian Premier Colin Barnett said today. Inpex remains committed to Darwin, President Naoki Kuroda said.
The Browse and Ichthys fields are among untapped gas deposits off Australia’s undeveloped Kimberley coast, where more than a third of the nation’s known offshore gas is located. The agreement reached late yesterday between Woodside, Western Australia and Aboriginal groups may allow for the development of an onshore LNG hub that could be used by several ventures.
“There’s a lot of water to flow under the bridge before LNG starts to be shipped out from that site,” said Peter Strachan, an analyst at Perth-based StockAnalysis. “The other Browse LNG parties would have to take a close look at it, while Inpex is already making plans to move their gas into Darwin harbor.”
Woodside’s Browse LNG partners, which include BP Plc and Chevron Corp., are still studying other options for the location of the onshore plant, including piping gas more than 800 kilometers (497 miles) south to existing plants at Karratha, the Perth-based company said today in a statement to the Australian stock exchange.
PetroChina, CPC
The partners may make a decision “possibly within weeks” on where to process Browse gas, Woodside Chief Executive Officer Don Voelte told reporters in Perth.
“We will have to take them through the economics and have to take them through our position on these issues,” Voelte said. “We are talking tens of billions of dollars here.”
Woodside, which has an initial agreement to sell Browse LNG to PetroChina Co. and Taiwan’s CPC Ltd., may start shipments in 2015, he said. Details of Woodside’s share of the compensation package for Aboriginal groups are confidential, Barnett said.
Inpex and partner Total SA last year decided to take gas from their Ichthys field about 850 kilometers east to Darwin for processing after an earlier plan to build a plant in the Kimberley region met opposition from environmental and Aboriginal groups.
‘Open Invitation’
Inpex and its partner face an “interesting scenario” on where to build their plant, Barnett said. The hub site at James Price Point is less than half the distance from the Ichthys field than Darwin in the neighboring Northern Territory.
Woodside has an “open invitation” to Inpex to come back and build its plant at the hub site, where companies could share jetties, storage tanks and power plants, Voelte said.
“If they stay in Darwin, fine, we will build along until there are other projects that come along,” he said.
Royal Dutch Shell Plc, which said last year it was studying using a floating plant at its Prelude field in the Browse Basin, still views that as the preferred option while backing the hub idea, the company’s Australian unit said in an e-mailed response to questions.
“Shell supports the concept of a hub rather than a plethora of development sites, and believes floating LNG technology will complement the Kimberley LNG precinct,” it said. Shell also has a stake in Woodside’s venture.
Yesterday’s accord allows cultural and environmental studies to take place before a final agreement for the hub is given by Aboriginal groups at the year-end, said the Kimberley Land Council, which represents the communities. There are “a multitude of very serious environmental considerations yet to be addressed” before the complex can go ahead, The Wilderness Society said in a statement.
LNG is gas that chilled to liquid form for transportation by tanker to destinations not connected by pipeline.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.netJesse Riseborough in Perth at jriseborough@bloomberg.net
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