Woodside Petroleum's failure to discover enough gas for a second train at its Pluto operation could add $1 billion to the flagship asset's expansion cost because of the need to build extra LNG tanks.
The fallout from the exploration failure, which has instead forced the company to focus on striking a supply deal with rivals owning gas fields in the Carnarvon Basin, comes as Woodside looks for savings of its expansion plan by chopping the new train size from 4.3 million tonnes a year to 3mtpa.
At 3mtpa, Pluto's future trains would be much smaller than the processing lines being construction at Chevron's Gorgon (5mtpa) and Wheatstone (4.45mtpa) developments and Inpex's Ichthys (4.2mtpa), and even below the proposed 3.6mtpa output of Royal Dutch Shell's industry-leading Prelude floating LNG operation.
The redesign of the Pluto expansion trains has also forced third-party gas owners, such as Hess, to re-engineer their own plans.
Woodside managing director Peter Coleman yesterday said the decision to cut the Pluto train size was driven by the need for a "breakthrough in cost structure".
"(At 4.3mtpa) it was too expensive and didn't offer the capital efficiency that we were looking for," Mr Coleman said. "So they (other gas owners eyeing Pluto) have to go back, they have seen the cost savings that we believe we can realise."
Hess began front-end engineering and design work for its Equus field late last year with the aim of being ready to strike a deal with Woodside this quarter, in line with Mr Coleman's original timetable. That timetable is being reworked.
Mr Coleman would not quantify the potential cost savings from slashing the train size. However, he flagged that Woodside's failure to feed future Pluto trains with its own gas may reduce its ability to cash in on the sunk investment of the $15 foundation project.
The foundation project includes two LNG tanks, enough to cater for extra trains provided the new gas is of similar heating value as the original Pluto supply. If not, Woodside might have to build extra tanks as part of an expansion.
"The big question is whether you can use the same tank, and that is the billion-dollar decision, that is not cheap," Mr Coleman said.