Woodside Petroleum and BHP have given the official green light to invest $12 billion to develop the Scarborough gas field off Western Australia and expand the Pluto liquefied natural gas (LNG) plant. The approval on Monday came at the same time the operators signed an agreement to merge BHP’s petroleum unit into Woodside, originally announced in August.
Scarborough will be able to produce 8 mtpa of LNG for export and 180 terajoules a day of gas for the domestic market. First cargo from the project is expected in 2026.
The project’s final investment decision was deferred in March 2020 when oil and gas prices fell sharply amid the COVID-19 pandemic. LNG prices have jumped since that time with Asian spot prices increasing from lows last year below $2/MMBtu to more than $37/MMBtu.
“Today’s decisions set Woodside on a transformative path,” said Meg O’Neill, chief executive of Woodside. “Scarborough will be a significant contributor to Woodside’s cash flows, the funding of future developments and new energy products, and shareholder returns.”
Customers have signed up to buy about 60% of Scarborough capacity, including for a proposed urea plant in Western Australia, O'Neill said.
The Scarborough field is located approximately 375 km off the coast of Western Australia and is estimated to contain 11.1 Tcf of dry gas. Development of the field will include the installation of a floating production unit with eight wells drilled in the initial phase and thirteen wells drilled over the life of the field. The gas will be transported to Pluto LNG through a new 430-km pipeline.
Scarborough gas, which will be processed through Pluto Train 2, will be one of the lowest carbon intensity sources of LNG delivered to north Asia, according to Woodside.
Woodside said its share of investment in the project, $6.9 billion, will be funded off its balance sheet. BHP on Monday signed off on $1.5 billion for the first phase of the development. It is not a stakeholder in the Pluto LNG plant.
To spread the cost of the project, Woodside last week agreed to sell a 49% stake in Pluto Train 2 to Global Infrastructure Partners (GIP). The estimated capital expenditure for the development of Pluto Train 2 is $5.6 billion. In addition to its 49% share, the joint venture arrangement requires GIP to fund an additional amount of construction capital expenditure of $835 million.
Completion of the Woodside/BHP merger is targeted for the second quarter of 2022. The effective date of the merger will be 1 July 2021.
