Woodside Could Transform Oz NWS LNG: Woodmac

Woodside looks to be the party most interested in Chevron’s 16.7% stake in the North West Shelf (NWS) LNG project and this transaction could transform both the company and the NWS, Wood Mackenzie said in a note published on June 24. Chevron announced its intention to sell the minority stake in Australia’s oldest LNG export project earlier this month.

“Firstly, for Woodside a deal could see the development of its Scarborough upstream project flowing into the NWS. This option could be a more economical alternative when compared to constructing a new Pluto expansion train,” David Low, senior research analyst at WoodMac, said.

Any facility modifications to accommodate for Scarborough gas and the increased budget for the KLE-2 project will need to be taken into consideration. “Woodside's ownership of upstream molecules that are most likely to supply the project in future will create greater value in owning additional equity,” Low added.

Secondly, this option could also change the outlook for Woodside's planned sell down of its positions in both Scarborough and the Pluto expansion train. “Would Woodside still pursue a farm down of Scarborough? And if so, could a divestment provide a pathway for an NOC to enter not only Scarborough but also the NWS itself? Both are possible outcomes,” Low said.

More players in the fray

Low said there could be interest from others as well. Japanese companies are already partners in the NWS as well as in many other Australian LNG projects and could find the sale of interest. National oil companies will be looking closely, including those from China, Russia and the Middle East, he said.

“In the current political climate, a bid from China would be an interesting test of the Australian government's increasingly defensive position on Chinese investment and may act as a deterrent,” he added.

Finally, a private equity-backed bid is also a possibility. “Brookfield has seen recent success and Harbour Energy has shown interest in the past. A tie-up with an operator like Beach Energy for the NWS stake could materialise, with Beach showing a strong appetite to grow its Australian portfolio,” Low said.

NWS has been exporting gas for three decades from offshore fields. Its partners, which besides Chevron include Woodside, Shell, BP and BHP Billiton, have invested $34bn in the plant to date. It produces just under 12mn mt/yr of LNG.