Woodside Petroleum’s Scarborough gas project will now cost $US12 billion, about $US600 million more than first expected, after the company sharpened its plans.
Woodside Petroleum’s Scarborough gas project will now cost $US12 billion, about $US600 million more than first expected, after the company sharpened its plans.
The Perth-based oil and gas producer is hoping to make a final investment decision by the end of the year.
The project will include an offshore development of the Scarborough gas fields, and a new liquefaction train at the existing Pluto LNG plant.
Woodside had previously announced it would review project design and costs.
About $US 5.7 billion will be spent on the offshore part of the project, with $US6.3 billion onshore.
The offshore cost rose by about 8 per cent compared to initial estimates, as Woodside increased capacity from a planned 6.5 million tonnes per annum to be 8mtpa.
The onshore cost lifted 3 per cent, with a need to modify the existing Pluto LNG train to process Scarborough gas.
All of that will mean the project has an internal rate of return of more than 12 per cent, and a supply cost lower than previous estimates at $6.8/MMBtu to north Asia.
Business News revealed earlier this year that the second Pluto Train had been approved for development by the state's JDAP process.
But there are still many steps to go.
One of those will be the selldown of Woodside’s equity in both parts of the project, bringing in a new partner and spreading the risk and cost.
Woodside will also need the support of BHP, which owns half of Scarborough, leading to rumours the company will buy BHP’s oil and gas business.
Acting Woodside chief executive Meg O'Neill said Scarborough would produce shareholder value.
“Significant progress has been made towards our targeted final investment decision on Scarborough and Pluto Train 2 this year,” Ms O'Neill said.
“The cost update includes value-accretive scope changes to deliver an approximately 20 per cent increase in offshore processing capacity and to modify Pluto Train 1 to allow increased Scarborough gas processing.
“It also reflects the work undertaken with our contractors to optimise the execution schedule and manage costs in preparation for final investment decision.
“Woodside’s contracting strategy for Scarborough reduces cost risk, with approximately 90 per cent of total project contractor spend structured as lump-sum and fixed rate agreements.”
Australian Petroleum Production and Exploration Association WA director Claire Wilkinson said significant headway has been made towards Woodside’s targeted final investment decision.
“If approved, Woodside’s proposed Scarborough development would deliver significant benefits,” Ms Wilkinson said.
“Scarborough gas would be a source of cleaner energy for Western Australia and play an important role helping overseas customers meet decarbonisation targets in their own countries.
“The development would provide thousands of construction jobs and hundreds of on-going operational jobs for Western Australians and opportunities for local businesses.”
