Woodside flags ‘government intervention’ risk with joint venture partners over $48b Scarborough and Browse LNG projects

Woodside Petroleum executive Meg O’Neill has raised the spectre of government intervention in a veiled threat to the company’s joint venture partners as it battles to realise its long-term vision for an integrated seven-train LNG production hub on the Burrup Peninsula. Speaking at the opening of the Australasian Oil & Gas Exhibition and Conference in Perth this morning, Ms O’Neill warned of the lost opportunity to WA in jobs, energy supply and business opportunities if the company’s $48 billion Scarborough and Browse projects did not go ahead. Woodside expects to make a final investment decision on Scarborough by the middle of the year after striking a key gas tolling agreement with joint venture partner BHP for the project in November. However, sanctioning the bigger Browse project was again pushed back last month because of prolonged negotiations with unaligned partners in the North West Shelf project, where the gas is planned to be processed. Woodside is now expecting a final investment decision on Browse towards the end of next year. Ms O’Neill, who is Woodside’s executive vice-president of development, noted the two developments relied on collaboration with industry partners. “In the event that industry can’t agree on opening up facilities to third parties, it would be understandable if governments were to intervene ... and none of us want that,” she said. The Federal Government has previously warned it could strip Woodside and its joint venture partners of retention leases over the gas fields if they continue to delay development of the projects. However, a volatile oil price has recently emerged as another potential threat to the two projects. The oil price plunged this week after leading producers Saudi Arabia and Russia threatened to ramp-up supply in a pricing war, however Brent crude rallied yesterday on the back of a planned US stimulus to combat the coronavirus epidemic. “We are used to managing risk and uncertainty but none of us know how this will play out,” Ms O’Neill said. “Even in the most stable of times, the reality for our industry is no company can deliver big projects alone. “We rely on engagement with government, regulators, communities, joint venture partners, contractors and suppliers large and small.” The recent oil price volatility also complicates plans by Woodside to sell down a stake in Scarborough to help fund its share of the $US11 billion project and lock in customers for the remaining 50 per cent of LNG volumes from Scarborough that are yet to be placed. Woodside shares, which have been swinging wildly this week with the oil price, closed down $1, or 4.5 per cent, at $21 today.