JERA to lift 1.2 mil mt/year equity LNG from Australia's Scarborough; plus 0.4 mil mt/year

Woodside Energy has agreed to sell a 15.1% stake in its Scarborough joint venture to JERA, allowing Japan's largest power generation company to lift 1.208 million mt of equity LNG once the 8 million mt/year project comes onstream, the Australian company said Feb. 23.

Woodside and JERA also entered into a non-binding heads of agreement for the sale and purchase of 0.4 million mt, or six LNG cargoes/year on a delivered ex-ship basis for 10 years commencing in 2026 from Woodside's global portfolio.

The 1.2 million mt/year Scarborough equity LNG will be sold by JERA Scarborough to JERA on an FOB basis, Yuichiro Kato, JERA's executive officer, head of the low carbon fuel value chain division, told an online press briefing.

"The volume will be included as part of our LNG portfolio for our own use, as well as it will be utilized and optimized by JERAGM (JERA Global Markets) as necessary," said Kato, adding that it will be similar for the remaining 0.4 million mt/year supply volume.

Kato declined to comment on further contractual terms including on LNG pricing.

From 2026, JERA expects to start lifting a total of about 1.4 million mt LNG with around 1 million mt from the Scarborough equity lifting and 0.4 million mt from Woodside's global portfolio, Kato said.

JERA's total LNG lifting volume would eventually go up to 1.6 million mt/year of LNG, Kato said without elaborating further timelines.

Kato attributed JERA's participation in the Scarborough project to Australia's proximity to Japan, and it has already taken a final investment decision with an advanced construction.

"We see the project has extreme cost competitiveness as an expansion project to the Pluto liquefaction terminal," Kato said.

Scarborough deals

Woodside's binding sale and purchase agreement with JERA for the sale of the 15.1% stake in the Scarborough joint venture is estimated to total $1.4 billion, with the transaction expected to compete in the second half of 2024 upon securing necessary permits and approvals.

The transaction also includes an option for JERA to acquire a 15.1% stake in the Thebe and Jupiter fields as well as a non-binding agreement that outlines a long-term collaboration to pursue opportunities for additional feed gas and joint investment in offshore gas fields for future tieback to the Pluto LNG facility via Scarborough infrastructure, Woodside said.

Following completion of its equity sale to JERA, Woodside will hold a 74.9% interest in the Scarborough joint venture and remain as operator.

The deal came as Woodside has been in talks with prospective partners for the Scarborough project after signing agreements with LNG Japan last August, under which it will sell a 10% non-operating participating interest in its wholly owned Scarborough joint venture and sell 12 LNG cargoes/year, about 900,000 mt/year, for 10 years from 2026.

"With LNG Japan, we were very delighted with the quality of that partner and the price they were paying. We would be happy to bring in another partner," Woodside Energy CEO Meg O'Neill told S&P Global Commodity Insights on Sept. 5, 2023, when asked whether Woodside was willing to sell more stakes in the Scarborough project to Japanese or other companies.

"We do continue to have discussions with prospective partners," O'Neill said.

Scarborough gas will be processed at the Pluto LNG facility, where Woodside is currently constructing Pluto Train 2. Woodside is also the operator of the Pluto Train 2 joint venture and holds a 51% participating interest.

The Scarborough joint venture comprises the Scarborough field located approximately 375 km off the coast of Western Australia.

The Scarborough field will supply gas to support the production of up to 8 million mt/year of LNG and domestic gas equivalent to 15% of LNG output, which will be reserved for domestic use in support of the state of Western Australia's domestic gas policy.

The Scarborough project targets the first LNG cargo in 2026 after a final investment decision in November 2021.