Woodside Sells Otway Stake to Origin for $646 Million

By James Paton

Nov. 2 (Bloomberg) -- Woodside Petroleum Ltd., operator of the Pluto liquefied natural gas venture in Western Australia, agreed to sell its stake in the Otway project off the southeast coast to Origin Energy Ltd. for A$713 million ($645 million).

Origin Energy, Australia’s second-largest electricity and gas retailer, will become operator of the Otway assets after the purchase of Woodside’s 51.6 percent stake, the companies said in statements today. Origin already has a 30.8 percent interest.

“Clearly Woodside’s view is their resources are best concentrated in the west,” Grant King, Origin’s managing director, said today in a conference call with reporters. “And knowing this asset well, we believe we can see additional opportunities to add some value.”

Perth-based Woodside is selling the interest in Otway, its only asset in eastern Australia, as it plans to enlarge the A$12 billion Pluto project. Pluto is among more than a dozen liquefied natural gas ventures in Australia and Papua New Guinea seeking to benefit from an expected rise in Asian demand for cleaner-burning fuels.

Woodside, Australia’s second-biggest oil and gas producer, operates the North West Shelf LNG venture and is seeking to develop a gas project in the Browse Basin in the far northwest.

Origin said it will fund the acquisition with A$4.4 billion in cash and undrawn debt. Sydney-based Origin also has said it is interested in the proposed sale of New South Wales power assets. The state government aims to sell three electricity retail businesses as part of a broader plan.

Capital Availability

A possible acquisition of New South Wales assets “would not of itself require us to raise equity, nor does this transaction of itself require us to raise equity,” King said. “The real issue is” whether Origin wants to have capital available when it makes an investment decision, likely late next year, on a natural gas project with ConocoPhillips.

Origin may decide to raise money prior to approving the LNG venture, he said. The A$35 billion Origin-ConocoPhillips project is one of five in the Australian state of Queensland planning to tap gas extracted from coal seams for conversion to liquid and export to Asia.

Woodside gained 1.1 percent to A$48.24 in Sydney trading, compared with the decline of 2.2 percent for the benchmark S&P/ASX 200 Index. Origin fell 0.7 percent to A$15.96.

Origin is expected to become owner in December and operator by the second quarter of 2010, Woodside said. The Otway project in Victoria supplies up to 10 percent of southeastern Australia’s current natural gas demand, according to Woodside’s Web site.

The other stakeholders in the Otway operation, Benaris International NV and CalEnergy Gas Ltd., may seek to increase their interest in the project on the same terms, Origin said.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.