Water-in-well rumours at NWS spark concern about LNG supply

REPORTS from Reuters citing two unnamed industry sources say Australia's North West ShelfLNG  project has asked at least one buyer in Japan to defer deliveries of some cargoes by several months. 
Water-in-well rumours at NWS spark concern about LNG supply Water-in-well rumours at NWS spark concern about LNG supply Water-in-well rumours at NWS spark concern about LNG supply Water-in-well rumours at NWS spark concern about LNG supply Water-in-well rumours at NWS spark concern about LNG supply

Sally Bogle

S&P Global is reporting that up to five market participants could be affected.  
One source told Reuters that a NWS buyer has been asked to delay the deliveries starting this month, with a second source saying that 10-15 cargoes could be deferred and that the delay could stretch until April 2022. 
Eight Japanese utilities buy LNG from the NWS project under long-term contract: JERA, Chugoku Electric, Kansai Electric, Kyushu Electric, Osaka Gas, Shizuoka Gas, Toho Gas and Tokyo Gas. The NWS has also delivered LNG under a long term contract to Tohoku Electric and Korea Gas.
The reason for the deferment could not immediately be confirmed but may be due to water in one of the project's offshore gas wells which are located in the Carnarvon Basin, off the north-west coast of Australia.
Gas from the NWS typically contains more than 85% methane. Dewatering gas wells is challenging in an offshore environment with time required to access, fix and flush out the system.  
A Woodside spokesperson told Energy News that it does "not comment on confidential operational matters, including cargo scheduling. There is no change to Woodside's previously disclosed production guidance range of 90-95 MMboe for 2021".  
According to S&P Global, Woodside's production guidance for 2021 is already 5%-10% lower than the 100.3MMboe it produced in 2020. The NWS is a five-train, six party project first built over 30 years ago. 
Woodside operates the NWS shelf project with its five equal partners BHP, BP Developments Australia, Chevron, Japan Australia LNG (MIMI) and Shell Australia.
China National Offshore Oil Corporation is also part of the NWS venture but does not have an interest in its infrastructure.
Any outages would be a blow to the group's outlook at a time when it is looking to continue the lifespan of the NWS and sign up new buyers.  
With LNG spot prices in Asia now over $10 per million British thermal units - the highest they have been for this time of the year since 2014 as Asia competes with Europe to restock inventories - prolonged outages could drive prices upwards.
A number of Australian LNG export facilities have been hit by unforeseen outages in recent years. Since commissioning in March 2016, Chevron's Gorgon project has experienced a string of operational issues due to welding faults in two of its three trains, keeping some production offline for several weeks this year and last. 
Technical problems at Shell's floating LNG facility Prelude in the Browse Basin halted production in early 2020, meaning WA was exporting LNG well below its total nameplate capacity. It follows a drop in production at Australian LNG plants last year due to social-distancing measures following the COVID-19 pandemic. 
The Browse gas fields over 900 kilometres offshore are earmarked as backfill but sanction has been delayed multiple times and Woodside has suggested at least one train could be shut in in coming years, despite ORO from Pluto fields and the onshore Perth Basin.