As reported by The Australian Financial Review‘s Street Talk column, US investment fund Global Infrastructure Partners is in place to buy 49 per cent of the second LNG train to be built at Woodside’s Pluto plant to process Scarborough gas. Woodside CEO Meg O’Neill has stated that she wants an agreement to sell Pluto-2 equity before a final investment decision to release more than US $ 3 billion.
But the improved market outlook for the Western Australian project comes amid growing opposition among some financiers, activist groups and other stakeholders to directing fresh capital to the development of fossil fuels, amid clear scientific evidence that new oil and gas projects should not be developed. gas resources to have a chance to meet global climate goals.
Asian LNG prices hit a record high of around US $ 56 per million British thermal units earlier this week in the midst of a gas crisis in Europe, and while they have since fallen back to $ 33, they remain around 16 times higher than in the depths of The COVID-19 pandemic in mid-2020.
Brent crude oil prices are trading at the same time near three-year highs north of US $ 80 per tonne. Barrel, where some analysts do not rule out a rise to 100 US $ through the looming winter in the northern hemisphere.
It creates oil and gas producers for a windfall of more than $ 1 trillion if prices continue to track above the $ 50 dollar / barrel industry planning price, according to global consulting firm Wood Mackenzie.
Still, research director Angus Rodger said that despite the clear and growing gap between Asian gas production and demand, there was no certainty that would lead to high reinvestments in the sector given competing choices to invest in low-emission energy or return capital to shareholders.
“At current Brent prices, the upstream industry will generate a wall of cash,” said research director Kavita Jadhav.
“Guy’s oil prices in US dollars give companies opportunities and a chance to do it all – return cash to shareholders, sustain oil and gas investments and accelerate investment in low-emission opportunities. The current upcycle provides a golden opportunity to move to a completely different future. ”
At the $ 12 billion ($ 16.4 billion) Scarborough business, Woodside has already taken a step toward a final investment decision by entering into a $ 40 billion merger agreement in August with BHP’s petroleum business.
BHP is a 25 percent partner in the 11.1 trillion cubic foot gas field, the largest growth opportunity in the combined Woodside BHP portfolio, which holds more than 2 billion barrels of oil, equivalent to approximately 375 kilometers off the WA coast.
Woodside has also tested the market for a sale of Scarborough, which would see a new partner join the company, an effort that Credit Suisse energy analyst Saul Kavonic says could be amplified by the high LNG spot prices.
“We are considering the possibility of a major commercial deal for WPL in the wake of the LNG crisis, allowing a sale of Scarborough to an LNG buyer to go faster and at a higher price,” Kavonic said.
He suggested an agreement to buy equity in the field could be combined with an agreement that Woodside could supply some LNG quantities to the buyer ahead of Scarborough’s start-up in 2026, for example over the next few years, with spot prices still expected to peak prices. related to crude oil.
“A validation of the Scarborough value in this way could, in our view, be a significant positive catalyst for WPL,” Kavonic said.
Woodside estimates a clear signal for Scarborough to create around 3,200 construction jobs at the top and increase Australia’s GDP by $ 125 billion by 2063, indirectly supporting the federal government’s gas-powered economic recovery strategy.
Gas from the company is to be supplied locally to a urea plant proposed by the Perdaman Group, while export LNG customers include Germany’s RWE and Uniper and Indonesia’s Pertamina. They account for about half of total production, but cover enough of Woodside’s share that it may be ready to give the go-ahead without further contracts.
Woodside’s general representative in Japan, George Gilboy, joined forces with other industry leaders this week to express concern about the potential downturn in rising gas prices.
Matt Kay, CEO of Australia’s latest potential LNG producer Beach Energy, said on Friday that developments in energy markets were “a reminder of the crucial role natural gas must play in the energy mix today and into the future to support the transition to a low-emission economy” and warned that prices could remain high in the coming years.
Kay said price increases “should not come as a total shock based on market fundamentals”, noting that industry expert forecasts have long predicted a tightening of the market until supply catches up around 2026.
“Europe is phasing out coal and Germany is phasing out nuclear power at a time when gas stocks are at a record high,” he said. “Meanwhile, expanded Russian imports via Nord Stream 2 still face challenges, and China is importing more LNG than ever before.”