Woodside ponders US LNG plant
Woodside Petroleum has teamed up with one of the world's biggest energy utilities to work on a plan to build an LNG plant in the US.
The non-binding memorandum of understanding, signed with the $US26 billion valued Sempra Energy on the sidelines of the World Gas Conference yesterday, will see Woodside investigate the financial merits of a 10 million tonne a year operation at Port Arthur, Texas.
The MOU does not guarantee Woodside will go ahead with the LNG proposal, which has been pursued by Sempra and includes regulatory filings for export approvals.
Neither side has revealed the likely cost, or indicative development timetable, of the two-train development and associated port infrastructure.
The Port Arthur site had initially been secured by Sempra for LNG import operations before the shale boom turned an energy-hungry country into being self-sufficient and awash with cheap gas.
Yesterday's deal with Sempra, the dominant energy provider in California, comes a decade after Woodside abandoned plans to build an LNG import terminal in the US to supply then-gas starved utilities like its new business partner.
Woodside chief executive Peter Coleman said the Perth company was pursuing a "pretty aggressive" timetable to advance the non-binding deal with Sempra, a utility he described as having similar values to Woodside.
"We will know by the end of the year whether we can go through to the next phase," Mr Coleman said.
Mr Coleman said the Sempra MOU added to Woodside's focus on "growing our business in core areas" that included North America, and comes on top of a half-share of the Chevron-run Kitimat shale LNG venture in Canada as well as an offtake deal with one of the US' most advanced LNG proponents, Cheniere Energy.
"Our business model is to source the lowest cost LNG globally," Mr Coleman said.
The proposed joint venture development does not include an upstream component, with the intention to buy third-party gas for processing at Port Arthur before the LNG is sold to overseas customers.
Investing in onshore gas fields, however, was an option, according to Mr Coleman, though he stressed the financial viability of the LNG processing operation would have to stack up first.
Woodside and Sempra are yet to set up a formal joint venture, which will depend on the outcome of the Perth company's due diligence of the Port Arthur proposal.
Sempra, which has 32 million customers, mainly in California and across the border in Mexico, welcomed the MOU.
"Sempra Energy and Woodside bring together an extraordinary complimentary set of experience and skills from two world-class organizations," Scott Chrisman, vice president of commercial & development for Sempra LNG, said.
"We look forward to engaging Woodside in discussions regarding the proposed Port Arthur liquefaction project."
The Sempra deal means Woodside's North American LNG business has the potential to match in size the operations of its WA home base, including the Browse FLNG venture which would include three floating processing vessels over gas-condensate fields off the Kimberley.
Woodside wants the Browse joint venture, which includes FLNG pioneer Royal Dutch Shell, to begin front-end engineering and design work as early as this month in what would be seen as a quasi-precursor to a positive final investment decision at the end of next year.
The reporter is attending WGC as a guest of the organisers of LNG18 Perth 2016
