* Woodside says to consider other floating LNG, other
* Western Australian govt wanted onshore plant for jobs
* Floating LNG option could cut Browse capex by 20
* Woodside shares rise 3 percent
By Rebekah Kebede
PERTH, April 12 Woodside Petroleum has
shelved plans for its $45 billion Browse liquefied natural gas
project in Western Australia, saying it will consider a floating
LNG plant after deciding the onshore development did not make
Global energy firms have invested $140 billion into six LNG
plants in just two and half years as Australia ramps up
production on its way to becoming the world's largest exporter
of the clean burning energy source.
But Australia's LNG sector has seen investor interest cool
due to huge costs overruns and with competition from North
America where new supplies of gas have been exploited from
The Browse decision could spell an end to new onshore gas
projects in Australia in favour of offshore plants that can be
built more cheaply and face fewer environmental and landowner
"This decision will surprise few as the proposed onshore
development always looked too economically, technically,
environmentally and socially risky for too little reward,"
analysts at Macquarie said in a note.
Woodside also appears to be pivoting its focus towards North
America, confirming on Friday that it had lodged an expression
of interest to develop a Canadian LNG project.
Browse LNG was to be Woodside's biggest LNG development yet,
but has been plagued by controversy over its proposed location
at James Price Point on the northwest coast, coming under fire
from environmentalists and some indigenous landowners.
The site is also home to the world's largest dinosaur
footprints and sacred Aboriginal sites known as "songlines".
Woodside CEO Peter Coleman said any new development would
have to provide significant costs savings, adding: "our
customers are saying to us very clearly,'No longer can we pay
for your expensive projects'."
A floating LNG plant is considered to be the most likely
alternative for Browse by many in the industry.
JP Morgan has estimated that a floating project would mean a
20 percent cost saving with capital expenditure of $35.5 billion
versus $44.6 billion for the onshore development option.
Estimates of the cost of the onshore plant vary, but some
analysts had said it could be as high as $48 billion.
Of seven LNG plants under construction in Australia, all of
which are due to come online in 2014 or later, four have already
announced cost blowouts ranging from 15 to 40 percent.
Woodside owns a 31 percent stake in Browse, which it is
developing with partners Royal Dutch Shell, BP Plc
, PetroChina, Mitsui & Co and
Shares in Woodside, which is worth around $30 billion, rose
3 percent on expectations it will develop a cheaper option, but
Japan's Chiyoda Corp, which has a contract for the
project, tumbled 11 percent.
Building a floating plant in Asia and towing it into place
off the Western Australia coast is likely to save billions of
dollars in construction costs.
Shell, which owns 24 percent of Woodside and is the
second-largest shareholder in Browse, is considered to be the
global frontrunner in developing floating LNG technology.
"We believe Shell's floating LNG technology is the fastest,
most economic and the best technical solution available for
Browse," Shell Australia country chair Ann Pickard said in an
Another joint venture partner, PetroChina, said on Friday it
is still deciding whether it will invest in Browse and is
studying the project's feasibility.
Earlier this month, Exxon Mobil and BHP Billiton
revealed plans to build the world's largest floating
LNG vessel offshore northwestern Australia, producing 6-7
million tonnes per annum (mtpa) of LNG from 2020-2021.
Woodside's Browse had been targeting 12 mtpa.
The decision to shelve Browse is a blow to West Australia's
premier, Colin Barnett, who won reelection last month and has
been a vocal proponent of establishing a gas export hub at James
Price Point, with Browse LNG as the cornerstone project.
Another option for the plant would be for it to be delayed
until construction costs ease, something some analysts expect to
occur once the existing plants under construction in Australia
"If Shell were to persuade Woodside that they need to take
more time on this, I don't think Shell would be criticized. I
think that would be seen as a sensible decision at this point,"
Tony Regan, an analyst with Tri-Zen International in Singapore
Shell has delayed its Arrow LNG development in eastern
Australia and has said it is in no hurry to proceed with an
expansion of Gorgon LNG, in which it is a stakeholder, leading
some to believe that the company would prefer to wait for costs
to decrease before making more large investments in Australia.
Prime Minister Julia Gillard said the decision was a
commercial one and did not mark the end of the country's near
decade-long boom in resources.
"We haven't seen the peak of the investment phase into
resources yet. And we are yet to see the peak of the production
phase," Gillard told reporters in Sydney.
"So we will be seeing the resources boom at work in our
economy for a long time to come."