Australia's Woodside expands long-term LNG supply agreement with Uniper to 2 mil mt/year from 2026

Sydney — Australia's Woodside said Jan. 18 it has expanded an LNG supply deal with Germany' Uniper, which strengthens the expected schedule for a final investment decision on the company's Scarborough/ Pluto Train 2 project set for the second half of this year.

The volume of Woodside LNG to be supplied under the expanded supply purchase agreement has doubled to an initial supply of up to 1 million mt/year from 2021 before increasing to around 2 million mt/year from 2026, Woodside said in a statement.

Woodside CEO Peter Coleman said the company has now secured long-term customers for over 40% of the expected Scarborough equity production.

The deal follows Woodside announcing Nov. 16 that potential Chinese customers of Scarborough LNG had walked away from negotiations amid a trade and diplomatic spat with Australia.

The majority of the LNG supply for the Uniper deal from 2025 is conditional upon an FID on Scarborough being made. The term of the agreement is unchanged from 13 years.

The plan is for Scarborough gas to be exported as LNG via a new second train at Pluto LNG. The current Pluto train has a 4.9 million mt/year capacity, while Woodside is looking at opportunities to increase the processing capacity for Scarborough from a base case of 6.5 million mt/year to 8 million mt/year.

Consultancy EnergyQuest noted Jan. 18 that Pluto operated at 108% of nameplate capacity in 2020 with 5.3 million mt of LNG, which helped to see Australia set record annual LNG exports in the year. A fresh high is tipped for the current year. The group estimates that Australia's exports of the fuel were 78 million mt in 2020, which would be up from 77.5 million mt in 2019.

"This is a good result given the disruptions to Gorgon, the fact that Prelude hadn't produced since early February, issues seen at Wheatstone with reduced production, and the COVID-19 destruction of LNG demand, particularly early in the year," EnergyQuest said.

The consultancy noted that Japan was once again Australia's top export destination at 30.3 million mt, down marginally from 30.7 million mt in 2019. Even amid the China-Australia tensions, China imported 29.6 million mt of Australian LNG in 2020, up from 28.8 million mt the year before, while South Korea maintained third spot with 8.1 million mt, up from 7.7 million mt the year before, EnergyQuest said.

"There remains the opportunity to further lift LNG production rates in 2021. A further 3.6 million mt/year will be added when Prelude reaches full production capacity and an additional 5 million mt/year from Gorgon once repairs to the cooling kettles have been resolved and production is back to full capacity," it said.

EnergyQuest is forecasting Australia will export 80 million mt of LNG in 2021, which is slightly above the Australian government's forecast in December of 79 million mt.

Meanwhile, Woodside and Uniper also agreed to collaborate on potential carbon-neutral LNG, with enhanced carbon accounting and the utilization of hydrogen as opportunities they will look at.