* Analysts say Woodside unlikely to meet mid-2012 FID target
* Say floating LNG may be an option for Browse gas
* Woodside says has not changed plans for Browse
By Rebekah Kebede
PERTH, Dec 5 Australia's Woodside Energy
is unlikely to meet its target for a final investment
decision on its Browse liquefied natural gas project by mid-2012
and may be forced to consider relocating the project, according
to industry analysts.
Woodside has struggled to reach a consensus with its joint
venture partners on its preferred site for Browse LNG project's
processing plant at James Price Point in northwest Australia,
while also facing local opposition.
"The end of next year would be the best case outcome (for
final investment decision) in our opinion," Mark Greenwood, head
of energy research at Citi in Sydney, said.
The view is shared widely among industry analysts, some of
whom think a Browse final investment decision is more likely to
be pushed back into 2013.
"We think that they might be in a position where they need
to optimise or reconsider the option and that could take time"
Greenwood said, referring to the joint venture partners.
Woodside owns 50 percent of Browse. Its joint venture
partners are BP, Chevron, BHP Billiton
and Royal Dutch Shell.
Industry analysts say Woodside's gas reserves from the
Browse Basin are now more likely to be redirected to its
existing North West Shelf LNG plant, also in northwest
Australia, an option that may provide a better return on
Redirecting the gas would mean that Woodside and its
partners would have to wait for some years until the North West
Shelf depletes its current gas reserves and can process the
Browse gas reserves for export.
"From a return on capital perspective, our analysis suggests
a higher return from the North West Shelf option, although the
net present value could be lower than a timely James Price Point
because of the delay in monetizing the assets," Greenwood said.
Woodside said it has not changed its plans for the Browse
"There has been no change to Woodside's position on the
Browse LNG Development," Woodside said in a statement on Monday,
adding that it is committed to locating the plant at James Price
Point. The company has also already issued invitations to tender
for work on its onshore plant.
BUYER DOUBTS & RISING COSTS
Meanwhile, the lack of agreement among the joint venture
partners has likely eroded the confidence of potential customers
for the Browse project's liquefied natural gas.
"It's clear that the joint venture partners are not that
enthused about that option and that means that the Asian buyers
are not seeing it as a credible development," Adrian Wood, an
analyst with Macquarie Equities Research in Sydney, said.
LNG developers typically try to sell around 85 percent of
the total volume of LNG, along with some project equity, before
making a final investment decision on a project to help underpin
the high capital cost of LNG projects.
And as the decision-making process wears on, costs are
increasing rapidly and delays could threaten the economic
viability of the Browse project, analysts said.
"All this time stagnating is eroding the economics very
quickly because we are seeing upstream cost inflation in
Australia of anywhere between 10 and 15 percent per annum,"
Macquarie's Wood said.
"If in 12 months time, we're no further down the track, what
looks like a marginal project today is probably uneconomical."
Given the rising costs, some in the industry said a floating
LNG might be a more likely option.
"Generally speaking, I think the floating option's cheaper
than just about anything else," Di Brookman, an energy analyst
with CLSA in Sydney, said, but added that the presence of an
offshore reef may limit that possibility for environmental
Shell, one of the joint venture partners in the Browse
project, is currently developing what it expects to be the
world's first floating LNG project, Prelude, off the northwest
coast of Australia.