Woodside in NWS backfill negotiations

WOODSIDE Petroleum CEO Coleman told Energy News this morning with sanction for development of the three large and distant gas fields that make up the Browse project pushed back again from 2021 to a date unknown there will be more ullage available at the five-train North West Shelf facility.
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Coleman confirms “challenge” for plant to stay fulL

Helen Clark

Editor

Speaking after yesterday's climate change question heavy annual general meeting, conducted virtually for the first time thanks to social distancing requirements, Coleman said spare capacity would be an issue that dogs many producers in the near to mid term.
 
"It does mean with Browse pushed back there will be more backfill or ullage available at the North West Shelf, so the North West Shelf partners are already in negotiations with a couple of parties who wish to provide that backfill from their existing operations," he told Energy News.
 
"Woodside is one of them."
 
He said how long backfill opportunities could last was indeterminate but "it is a challenge for the North West Shelf to stay full".
 
"But it is something all the partners know and they're working on it, and it's going to be a common issue globally. They're going to be looking at spare capacity around the world, not just the North West Shelf.
 
"And I think you'll find that many projects won't move forward and Browse won't be the only one of those."
 
At the same time given the way LNG is traded, and the difficulty in storing it in similar ways to crude, there are no planned production shut ins at any of its facilities in Western Australia.
 
The NWS facility is operated by Woodside with five other partners all owning a 16.7% stake. 
 
They are BHP, BP, Shell, Chevron and Japan LNG or MiMi, which is a joint venture between Mitsui and Mitsubishi.
 
Woodside, BP, Shell and Japan LNG all have shares of the Browse field, meaning tolling agreements with the alligned partners have dragged, especially given BHP was intially keen to see the Scarborough field's gas, which it shares 26.5%-73.5% with Woodside, head to the facility. 
 
Woodside has been firm it wishes to see Scarborough gas head to an expanded Pluto LNG facility with a pipeline connecting it to the NWS. 
 
Chevron, meanwhile, had its eye on its own Clio-Acme assets offshore Western Australia. 
 
 The ongoing rumours in the south of the state from both industry and environmentalists is NWS backfill could come from the Perth Basin, or at least see domestic gas obligations come from there. Strike Energy managing director Stuart Nicholls reiterated that last night at a virtual Petroleum Club WA presentation.
 
"In my view the owners would much rather take the LNG into their own portfolios, so I see the NWS as a buyer coming into the market," he said. 
 
"This might create the NWS as being the demand sink for all
uncontracted and developable gas, caveat to that, it must be non-domestically
reserved, but could LNG netback pricing be the new floor price for WA gas."
 
Mitsui also owns a 50% stake in the Waitsia and Beharra Springs Perth Basin fields with Beach Energy, and an 8.35% stake in the NWS via Japan LNG.
 
Another option floated in the latest Resources and Energy Quarterly from the Office of the Chief Economist was for the private Western Gas, run by ex-Woodsiders, to send gas from the large Equus field to the NWS, though the company's stated plans see a smaller LNG facility of its own.
 
Meanwhile the staunchly anti-Browse Conservation Council of Western Australia has also looked to the possibility of Perth Basin gas headed north for liquefaction, but worries fraccing could be involved. 
 
However, given Coleman noted the difficulty of cutting production thanks to the long term contract structure of 80% of its production and declining field volumes going through the facility the partners will need to find a solution soon.