In a report obtained by Energy News called Australian LNG: restocking the North West Shelf, Wood Mackenzie's Australasia oil and gas lead analyst Saul Kavonic says the planets are aligning for a decision on backfilling one of Australia's largest economic assets, but there are no certainties.
Kavonic said NWSV production will decline from 2021 unless its business model changes and more gas can be found to keep it full.
"For a 2025 start-up, final investment decision needs to be 2020-21, front-end engineering design will need to be two years before that, so you need serious commercial discussions to advance sufficiently in the next 18 months to meet that timeframe," he told Energy News.
The NWS has been a bulwark of Western Australia's economy and a mainstay of domestic gas supply for decades.
Yet there are real drivers for renewal to happen, and Kavonic says "conditions are unlikely to get more favourable than what we have now".
The project is material to Australia's Treasury, as life extension would mean up to US$48 billion (A$61.14 billion) in additional taxes to the federal government over the project life.
"There are signs the government is becoming more proactive in the sector, and has leverage under the retention lease system to push developments forward," Kavonic said in the report.
"The Australian regulator, NOPTA (National Offshore Titles Administrator), recently sent a letter to resource owners requesting more information on the viability of life extension for the NWS."
Kavonic believes processing third-party gas is required as additional exploration looks "doubtful".
It would be the first time an Australian offshore LNG project has taken a toll to liquefy third-party gas, but would require a change of mindset by numerous LNG players to make it work.
While Australia's LNG industry has a poor record of sharing third-party infrastructure, the new industry focus on costs and margins is changing things.
Greenfields infrastructure duplication is off the cards and LNG industry collaboration is now receiving more serious consideration than ever, as evidenced by Subsea Energy Australia's work with National Energy Resources Australia to develop a subsea cluster.
That works well with plans flagged by Chevron Corporation last year about the need for a subsea cluster approach to pool resources to extend the NWSV's life.
Wood Mackenzie believes there are only four main field development candidates for NWS life extension: the Browse fields [Torosa, Calliance and Brecknock]; Scarborough; undeveloped Greater Gorgon fields such as Geryon and Orthus-Maerad; and the nearby Clio and Acme fields.
The firm believes that while all of these are likely to be economic, but they all have differing equity structures to the NWS LNG plant JV, which is where the headaches begin.
Kavonic agrees with Woodside Petroleum CEO Peter Coleman that Browse is the leading contender as it has the largest resource, the greatest level of JV alignment and is the NWSV operator's selected development case.
Yet other upstream resources are still in play that could be sequenced in priority to, alongside or after a Browse development.
"We believe that Woodside's pursuit of a Browse development, even if it doesn't eventuate, will catalyse the development of alternative supply options for NWS," Kavonic said.
Yet despite competitive economics, Kavonic warned that a backfill development is "not a certainty".
"JV alignment - both internally and between upstream and downstream - remains a key obstacle," he said.
"If a backfill development is successful, it could pave the way for the commercialisation of additional offshore gas resources currently considered stranded.
"Alternatively, M&A across either the upstream and/or within the NWS JV remains an option if agreement for tolling cannot be reached."
In this way he was referring to Coleman recently flagging that Woodside could be interested in buying ExxonMobil out of the Scarborough gas field.
"If Exxon is making decisions and prioritising other assets that they've just recently purchased over Scarborough then that's another opportunity for us," Coleman said last month.
LNG suppliers are also starting to see positive price signals post-2023, with Chinese demand improving, South Korea reigning in coal and nuclear investment, and both India and Pakistan seeking new gas supplies.
These drivers mean a NWSV life extension development should be able to take advantage of both a deflationary cost environment through the construction phase and a tightening market once production begins.