Australia's Woodside Energy gets final clearances to proceed with Scarborough gas project

Australian LNG exporter Woodside Energy, the operator of the Scarborough Joint Venture, said April 6 that the Scarborough Project has received key approvals from regulators that will allow it to go ahead with the next stage of development to produce and export natural gas.

The Scarborough Joint Venture has received approval to construct and operate the Scarborough pipeline in Commonwealth waters, and for the Scarborough Field Development Plan (FDP) that allows petroleum recovery operations to start from Petroleum Production Licences WA-61-L and WA-62-L, Woodside said in a statement.

ASX-listed Woodside said the clearances follow final investment decisions made in November 2021 that green lit the $12 billion project for the Scarborough and Pluto Train 2 developments, of which Woodside has a share of $6.9 billion.

"Scarborough gas processed through Pluto Train 2 will be one of the lowest carbon intensity sources of LNG delivered to customers in north Asia, with first LNG cargo targeted for 2026," Woodside said.

"The Scarborough reservoir contains only 0.1% carbon dioxide, and Scarborough gas processed through the efficient and expanded Pluto LNG facility supports the decarbonization goals of our customers in Asia," Woodside CEO Meg O'Neill said in the statement.

With global natural gas and LNG prices at record highs, upstream producers are rushing to complete projects and start hydrocarbon production as soon as possible to capture market demand. High prices have also incentivized banks to finance projects more easily and governments to prioritize energy security over environmental issues.

"Following the European crisis, the demand for Australian LNG is now likely to be even greater. If Europe increases LNG imports significantly over the next few years, LNG markets are likely to remain tight and with a need for new projects, targeting Asia as well as Europe. This should be an opportunity for Australia," Graeme Bethune, Chief Executive Officer of Adelaide-based consultancy EnergyQuest said recently.

He said the first priority for Australian companies is to win more contracts for new projects and Woodside should be able to contract more of Scarborough.

"In the context of the European gas crisis, it is interesting that the two Scarborough LNG offtake contracts are with German utilities RWE and Uniper," Bethune said. "Their reason for committing to Australian LNG is not clear. Perhaps it is because they see greater gas opportunities in Asia than in Europe."

"However, given the European crisis, it also provides an additional source of gas supply. RWE is already involved in plans to build a German LNG import terminal and the German government is reported to have asked Uniper to do the same," Bethune added.

The Scarborough field is located around 375 km off the coast of Western Australia with an estimated 11.1 trillion cubic feet of dry gas reserves and plans to transport gas from Pluto LNG through a new 430-km pipeline, according to the company.

The Scarborough Joint Venture comprises Woodside Energy with a 73.5% share and BHP Petroleum (Australia) with the remaining 26.5%.