Woodside aims high [NGW Magazine]
In mid-November, Australian explorer Woodside unveiled a plan to triple its oil and gas reserves in less than a decade. The Perth-based company said most of the growth will come from the Scarborough and Browse gas projects in Australia; the Sangomar oil project off Senegal; and the A-6 gas project in Myanmar. If Woodside manages to execute the plan, its oil and gas reserves will increase from 1.23bn barrels of oil equivalent at present to 3.71bn boe over the next seven years.
According to the company projections, the Scarborough gas project will be the biggest contributor over the next seven years and will add 1.462bn boe to the reserves. The Browse gas project will add 866mn boe while the Sangomar oil project will add 81mn boe and the A-6 project another 67mn boe.
“These projects have not taken a final investment decision (FID). I expect Scarborough will take FID around the middle of next year, Senegal early next year and Browse in 2021,” said Wood MacKenzie analyst Daniel Toleman.
Scarborough resource spike
Early in November Woodside said the estimated gross contingent resource (2C) dry gas volume for the Scarborough field had gone up 52% from the previous estimate. The company reiterated it is targeting a FID for the development of the Scarborough gas resource in the first half of 2020.
“Woodside's estimated 2C resource for the Scarborough field has increased by 3.8 trillion ft3, from 7.3 trillion ft3 to 11.1 trillion ft3. The use of FWI seismic processing has led to improved data quality and better depth conversion of reservoirs both in Australia, and globally. Its use has already led to incremental reserves increases on other fields in the Carnarvon basin, but generally not on the scale of Woodside's announcement,” Toleman said.
Scarborough gas would be initially processed on a deep-water floating production unit and transported through a 430-km pipeline to a proposed second LNG production train at the existing Woodside-operated Pluto LNG facility on Western Australia’s Burrup Peninsula.
“Everything we have learned and achieved in progressing the Burrup Hub in the past year has demonstrated that this is a world-class development opportunity and a compelling investment. As a low-cost, high-margin producer, Woodside is delivering near-term value through our robust base business and efficient operations while progressing growth plans to create sustained, longer-term value,” CEO Peter Coleman said while announcing the growth plan.
He said that the recent breakthroughs on Scarborough show momentum is building towards FID. “We have unlocked huge potential for this world-class gas resource, using advanced technologies and subsurface expertise to increase the estimated resource volume by 52%,” Coleman said.
“And significantly, Woodside and BHP have agreed the tolling price for processing Scarborough gas at Pluto. Woodside’s expertise in project delivery is evident, with the Greater Enfield and Greater Western Flank Phase 2 projects both delivered on time and under budget,” he added. This was a major step forward for Scarborough.
The Perth-based producer said that the agreed price would be valid until March 31, 2020. It did not disclose the price, but said it was based on BHP maintaining no more than a 25% interest in the WA-1-R block containing Scarborough until a final investment decision on the project is taken. However, during an interaction with analysts post the unveiling of the growth plan, Coleman said BHP toll is above A$3 (US$2)/mn Btu.
Coleman said that the integrated seven-train LNG processing centre on the Burrup Hub is taking shape, with FID reached on the interconnector pipeline. Early in November, Woodside took FID on the pipeline component of the Pluto-North West Shelf (NWS) interconnector and entered into contractual arrangements with DDG Operations for the construction of the pipeline and its ongoing operation and maintenance. The Pluto-NWS interconnector will connect Pluto LNG and the NWS project’s Karratha gas plant and is the first component of the infrastructure needed to transport gas between the two facilities.
Woodside, as operator of the Browse joint venture, is proposing to develop the Brecknock, Calliance and Torosa fields, some 425 km north of Broome in the offshore Browse Basin. Hydrocarbon resources contained in these fields are mostly gas, with contingent resources of close to 16 trillion ft3 of dry gas, and 466mn barrels of condensate. The Browse joint venture partners are Woodside (30.6%), the European majors Shell (27%) and BP (17.33%); a Mitsui-Mitsubishi joint venture (14.4%); and PetroChina (10.67%).
In November 2018, the Browse joint venture, the North West Shelf joint venture and Chevron, the leaseholder of the Clio-Acme fields, signed non-binding preliminary agreements for processing offshore gas resources through the North West Shelf facilities on Western Australia’s Burrup Peninsula.
Woodside has envisioned that two floating production, storage and offtake (FPSO) vessels would be connected to the North Rankin Complex, from where the gas would be shipped via a 900-km pipeline to the Woodside-operated North West Shelf infrastructure.
The Sangomar field development (formerly SNE) is positioned to be Senegal's first offshore oil development, a deep-water discovery 100 km offshore the capital, Dakar. In December 2018. Woodside was appointed operator of the development and began front-end engineering and design activities.
The first phase development concept for the Sangomar field is to have a stand-alone FPSO vessel with subsea infrastructure. The FPSO will be able to handle around 100,000 b/d. It will be designed to allow subsequent development phases, including options for potential gas export to shore and for future subsea tiebacks from other reservoirs and fields.
Woodside is in the final stages of readiness to take FID on the Sangomar Phase 1 development, Coleman said.
Early in December, the company said that it had submitted the Sangomar development and production plan and its production authorisation request to the government of Senegal. This authorisation request is the last major regulatory submission needed before the joint venture partners can take FID.
Woodside holds a 40% stake in Block A-6 off Myanmar and is the joint operator of the block with state enterprise MPRL E&P, which has a 20% interest. French major Total holds the remaining 40% in the block. The partners have planned six wells in the first phase. They plan to enter Feed stage next year, conduct site surveys and engineering studies and push for key regulatory approvals. Woodside says that it has had success finding gas every year since 2015 and last year’s campaign included the successful appraisal of the Shwe Yee Htun field in Block A-6 and a gas discovery at Aung Siddhi-1 in Block AD-1. But its operations there are not a priority: they “support the second and third time horizons” in its strategy: to “monetise exploration success, increase supply to new and traditional markets, and unlock new major hubs.”
And perhaps even further down the line are its contingent 5.13 trillion ft3 of gas and 226mn barrels of condensate in the Timor Sea: the Greater Sunrise project. Some 450 km north-west of Darwin and 150 km south of Timor-Leste, the fields were discovered in 1974. The two countries however were unable to agree a development plan.
In November 2018, the governments of Timor-Leste, Australia and the Sunrise Joint Venture discussed the terms of a new Greater Sunrise production-sharing contract but nothing concrete has been planned. Woodside says: “Until new arrangements are in place, the Sunrise Joint Venture will continue to honour existing commitments, support social programs in Timor-Leste, and maintain an office in Dili.”
Divest to fund the growth
Excluding Sunrise, the above projects cost close to $36bn and Woodside expects to raise some of that from selling down some of the projects.
“Woodside has announced it is looking to sell down both Scarborough and Pluto T2 to around 50%,” Toleman said. Woodside is planning new 5mn mt/yr processing unit at the Pluto plant.
Despite the ambitious growth plans announced, these projects face some real risks. According to Toleman, the key risks before FID relate to the commercial negotiation, which may delay FID. For instance, talks on Browse involve several partners in both the field and the associated North West Shelf LNG plant. Chevron and BHP are stakeholders in the LNG plant but not Browse, and PetroChina has a stake in Browse but not the LNG plant.
“Browse is most likely to be delayed by the negotiations,” Toleman said. “Post-FID the key risks are execution risks that may lead to schedule delays in the construction period.”