The Woodside Petroleum-led Browse LNG joint venture has invested $1.24billion developing its planned greenfield project at James Price Point inWestern Australia's Kimberley region, about as much as it was required tospend under retention lease conditions imposed by the Australian governmentin 2009, investors were told Monday.
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The Browse joint venture was last month granted a one-year extension ofa government-imposed deadline to formally approve the LNG project, givingit until mid-2013 to take a final investment decision. The terms of the leaserenewal conditions originally required the Browse partners to spend A$1.25billion ($1.22 billion) on front-end engineering and design, and to take FIDon the proposed LNG project by the middle of 2012.
The Western Australian state government has designated the James PricePoint site as a processing precinct or hub for all the gas developed in theoffshore Browse Basin. Under its lease conditions, the Browse joint venturewas required to build its onshore liquefaction facilities at the site, unlessit could demonstrate that an alternative development concept was likely to becommercially viable at an earlier time.
"James Price Point is the main game for us," Browse Senior VicePresident Michael Hession told the briefing, according to background materialreleased by Woodside.
The company operates the Browse LNG joint venture on behalf of itspartners BP, BHP Billiton, Chevron and Shell. Woodside earlier this monthagreed to sell 14.7% from its unitized stake of 46% in the project toMitsubishi and Mitsui's Japan Australia LNG (MIMI) joint venture for $2billion.
At times in the past, Woodside's joint venture partners have expressedreservations about processing Browse gas at James Price Point, suggestinginstead that it should be piped to the existing North West Shelf LNGfacilities at Karratha as "backfill" gas by 2020. The Browse partners are allstakeholders in the North West Shelf project.
Woodside's Browse project is based on 15.5 Tcf of gas and 417 millionbarrels of condensate held in the Brecknock, Calliance and Torosa fields. Theproject's onshore liquefaction facilities would produce 12 million mt/year ofLNG.
Hession said the recent extension to the FID deadline provided thecompany with time to better evaluate FEED outcomes, major tender packages andcomplete necessary assurance activities.
"All upstream and downstream commercial bids will be received by endfirst-half 2012," he said. "We will start to evaluate project costs andeconomics in the third quarter in readiness for a first-half 2013 FID ... Weare confident that our competitive FEED process is driving quality, cost andschedule certainty in the upstream and downstream scopes."
Analysts at Bernstein Research said in a note that costs and partners atBrowse remained a challenge.
"We expect costs of $40 billion to $45 billion, or about$3,300-3,500/mt, based on recent projects," Bernstein said. "Browse will beexpensive LNG and the decision on FID for James Price Point remains dependenton a tight global LNG market, which in turn will be dependent on Japan'snuclear restart decision and US LNG export approvals."
Woodside's president of marketing, Reinhardt Matisons, told investorsthat uncontracted LNG demand in the Asia Pacific region would be between 65million mt and 80 million mt in the 2018-2020 timeframe, when Browse would beexpected to start up. Most of this demand would be in premium markets whereLNG prices are expected to remain high, and primarily linked to oil.
"The outlook for a rapidly expanding role for LNG in the region isunderpinned by ongoing investment in regasification capacity," Matisonsadded. "Import capacity, based on current proposals for new terminals, is setto increase by more than 150 million mt/year, or 50% of current capacity,between now and 2020. This includes the startup of imports into bothIndonesia and Malaysia during 2012, both traditional LNG exporters. There arealso plans for Asia Pacific import terminals in Bangladesh, New Caledonia,Pakistan, the Philippines and Vietnam."
The James Price Point site is in an environmentally and culturallysensitive area and has been mired in controversy over recent years as sometraditional landowners have refused to support a A$1.5 billion social andeconomic benefits package signed last June by Woodside and the GoolaraboolooJabirr Jabirr native title claimant group.
Separately, the Australian Broadcasting Corporation reported Monday thata traditional landowner has taken Woodside to the Supreme Court to stop workat the James Price Point, claiming the company had not followed the correctapprovals process for the site.
--Christine Forster, email@example.com_forster@platts.com
--Edited by Deepa Vijiyasingam, firstname.lastname@example.org email@example.com