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Woodside set to justify Browse decision
Woodside set to justify Browse decision

Woodside Petroleum is just weeks away from telling the State and Federal governments how much it would have cost to build an LNG processing hub at James Price Point to justify why it axed the contentious plan.

The submission of the commerciality report, which will include the forecast development cost, is expected to be used by project operator Woodside to advance its argument that the Governments should agree to a variation of the Browse retention lease conditions, which stipulated that the LNG plant be built at James Price Point.

Six weeks ago Woodside confirmed widespread market speculation that the James Price Point development concept was not economically viable, and it has since all but confirmed that the consortium partners would pursue floating LNG instead.

However, Woodside has so far refused to disclose how much the James Price Point development would have cost, with analysts suggesting figures from $45 billion to life-of-field estimates of as much as $80 billion.

Speaking on the sidelines of the Australian Petroleum Production and Exploration Association conference in Brisbane yesterday, Woodside chief executive Peter Coleman stopped short of confirming that the commerciality report and retention variation request would be submitted by June 7.

"It will happen in coming weeks," he said, before adding that he remained confident the Browse partners would be in a position within two years to make a final investment decision on a revised project development.

The Woodside consortium's hold on the permits remains subject to government approval of the request for the retention lease conditions to be varied.

Mr Coleman said there was alignment among the consortium members, unlike the last time a development concept - James Price Point - was chosen, although there had not yet been a formal decision on FLNG as the way forward.

However, Mr Coleman for the first time spelt out aspects of the likely FLNG development plan, suggesting one floating production vessel to start with and a staged development of the three gas fields that make up the Browse project. That way, he said, the capital cost would be spread as opposed to the massive upfront cash required for a land-based plant.

He said Woodside had "negotiated hard" with consortium partner Royal Dutch Shell for access to Shell's FLNG technology, and successfully demanded that Woodside retain the project's operatorship. Woodside would pay Shell a fee for using the FLNG technology, to compensate Shell for some of the research and development costs, but also to ensure that much of the technology work was carried out in Perth to transform the city into a world-class industry hub.