* Browse partners plan to seek lease extension
* Partners need time to evaluate contract tenders, design
* Government not ruling out lease extension
* Woodside committed to James Point as location for Browse
* Shares down more than 3 pct
By Rebekah Kebede
PERTH, Dec 19 Woodside Petroleum
warned on Monday it may need to delay a final investment
decision on Australia's huge Browse LNG project by nearly a year
to the first half of 2013, sending shares in the energy firm
down over 3 percent.
A delay had been predicted by analysts and Woodside said the
Browse Basin partners planned to seek an extension to lease
terms, which currently require them to make a final investment
decision by mid-2012.
Woodside said the extra time would allow the company "time
to better evaluate the outcomes of front-end engineering and
design work and the results of the tender processes for the
development's major contracts".
"We believe, and so do some of our joint venture partners,
that we need just a bit more time to go through that process
given the magnitude of the work that needs to be done and where
we find ourselves in the process today," Woodside Chief
Executive Peter Coleman told reporters.
Woodside has not released a project cost estimate,
but media reports put the cost of the 12 million tonnes-a-year
liquefied natural gas export project at around A$30 billion ($30
Woodside owns 50 percent of Browse, which is estimated to
hold about 13.3 trillion cubic feet (Tcf) of gas. Its partners
are BP, Chevron, BHP Billiton and
Royal Dutch Shell.
The decision to push back the project timeline had
long been expected by those in the industry.
Australian resources minister Martin Ferguson indicated last
week he would be willing to consider an extension to the
retention lease, while adding that he was sure the project was
"Even when that retention lease was awarded, our take at
that stage was that it's highly unlikely that they would be able
to make that mid-2012 deadline with the strongest will in the
world," said Craig McMahon, an analyst with Wood Mackenzie in
"It's a huge project for anyone, let alone a company of
Woodside's modest size, they do need the proper time to actually
evaluate those tenders before taking final investment
Slower-than-expected results from tender invitations on
the Browse project or higher-than-expected costs from the
tenders may have surprised the joint venture, Mark Wiseman, an
analyst with Goldman Sachs in Sydney said in a note on Monday.
MIXED VIEWS ON LOCATION
Woodside's announcement sparked some further speculation
among some analysts that Woodside may revisit its plan to
develop the project at James Price Point, on the coast of
But Chief Executive Peter Coleman told a conference call
Woodside was still committed to the location. "James Price Point
is clearly the main game for us ... we always keep a weather eye
out for any changes in the conditions at James Price Point
or other changes in the market," he said.
Woodside has faced local opposition to building a plant at
James Price Point, while its partners have suggested another
location, such as the existing North West Shelf plant further
south, may be more suitable.
The Australian government is eager to see Browse developed
as soon as possible and the conditions of the lease restrict the
project's location to James Price Point.
But some analysts hold that the location may ultimately be
too challenging and that Woodside may need to explore other
"The greater question is not when a Browse LNG project will
happen, but where," Stuart Baker, an analyst with Morgan Stanley
in Melbourne said.
The cost of building a greenfield project and continuing
issues around it would be significant challenges.
"It is increasingly possible that other development options
are re-considered, including the use of floating LNG."
Sending the gas to the existing plant would mean Woodside
and its partners would have to wait for some years until the
North West Shelf depletes its gas reserves and can process the
Browse gas for export.
But other analysts said the decision was a minor delay and
would not affect the location of the project.
Woodside's decision to delay the final investment decision
target does not make it more likely that the joint venture will
direct the gas to the North West Shelf instead of James Price
Point, according to Gordon Ramsay, an analyst with UBS in
Woodside shares fell 3.3 percent to A$30.27 in afternoon
trade. The broader market was 2.3 percent lower.