OPINION

LNG project equity is the easiest thing to sell: Gallagher

SANTOS has not sanctioned nor sold down Dorado, has not sold down a share in the Pikka oil project in Alaska prior to today’s greenlight and is in advanced talks to sell a 5% stake in the valuable PNG LNG to as-yet unnamed parties. 

LNG project equity is the easiest thing to sell: Gallagher

It holds 80%, 51% and 42.5% of these projects, respectively.
 
In this it joins the larger Woodside Energy Group, which has been unable to offload some of its 82% share of its own Senegal oil project and has now closed the process. 
 
Woodside also holds 100% of the upstream component of the Scarborough gas project after the merger with BHP's petroleum division gave it an additional 23.5%. BHP earlier had an option to increase its stake by 10%, and declined. 
 
Former and current chief executives have repeatedly told the market they'd prefer to sell down both. Woodside CEO Meg O'Neill said she was unconcerned at the larger Sangomar stake offshore West Africa. 
 
Speaking to investors today after half-year results Santos managing director Kevin Gallagher said he was unconcerned at holding so much of the Alaskan project. 
 
"It is true I communicated I wanted a lower equity level and we would be open to all sorts of offers," on Pikka, he said. 
 
Gallagher said there was "a lot of interest in the asset, people do see value in that but so far we're not able to progress that, and we don't want to sit there forever. 
 
"We're remaining open to sell down in the development phase as we did in Barossa.... It will become more valuable over time.
 
"Volatility has made it very difficult to sell anything other than LNG projects... if you've got a good LNG project to sell then I cannot see why you cannot do that in the environment.," he continued. Santos has sold down its only current LNG development. 
 
It has farmed down stakes in the very high CO2 field, which will backfill the one train Darwin LNG from 2025, to Jera at the end of 2021 after the project's sanction and 37.5% to SK E&S earlier. 
 
However Woodside has been mute on the subject of letting go some of Scarborough, despite its latest quarterly noting the process was ongoing. The full project will cost A$16 billion, although half of the new train at Pluto has been farmed down. 
 
Over two years ago former CEO Peter Coleman said there would be no deals with China for either equity or offtake for as long as Canberra-Beijing relations remained frosty. 
 
Woodside raised billions for its wider Burrup Hub project in early 2018 and took the majority stake of Scarborough from ExxonMobil. Sanction was delayed more than once thanks to first disagreements on tolling with BHP, which wanted to use the existing North West Shelf LNG facility, and then COVID and an oil price crash. 
 
However despite varied names popping up, Saudi Aramco apparently among them in 2019, the project remains in the Perth company's hands entirely. 
 
Energy News has heard there have been plenty through the Woodside data room, but it seems nothing has stuck. Perhaps there was an issue with the project's last reserve upgrade, made in November prior to investor briefing day in 2020? 
 

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Energy News Bulletin Intelligence team.

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