Woodside Petroleum Ltd. (WPL), Australia’s second-largest oil producer, said producing liquefied natural gas on a ship off the country’s coast may be the fastest way to develop its Browse project.
Woodside reached an agreement with Royal Dutch Shell Plc (RDSA) on how to develop Browse if the partners choose to develop the project using Shell’s floating LNG technology, the Perth-based company said today in a statement. The selection of a development concept needs to gain approval from all the partners, including BP Plc (BP/), according to Woodside.
“FLNG had the potential to commercialize the Browse resources in the earliest possible time frame and to further build the company’s long-standing relationship with Shell,” according to the statement from Woodside.
Woodside earlier this month scrapped a plan to build an onshore LNG project estimated to cost $45 billion in favor of studying cheaper options as costs rise. After starting work on $180 billion in LNG plants on land in Australia, developers are considering about $85 billion in floating projects.
Floating LNG may be almost 20 percent cheaper than building a Browse project on land, Deutsche Bank AG said this month. A new onshore Browse development would have cost about $45 billion, JPMorgan Chase & Co. said in an April 12 report.
While Woodside said earlier this month that it would consider a floating LNG plant offshore, a pipeline to existing facilities in Western Australia or a smaller onshore plant, Shell said its floating LNG technology is the best plan.
The companies initially planned to send natural gas from three fields off the Western Australia coast to a processing plant at James Price Point in the Kimberley wilderness region. The fields are located in the Indian Ocean, about 425 kilometers (264 miles) north of Broome in Western Australia state.
“Unfortunately the cost escalation has been such that the total costs for Browse have resulted in the current development concept not being commercial,” Woodside Chief Executive Officer Peter Coleman said in an April 12 statement.
Woodside reached a deal last year to sell a 14.7 percent stake in Browse to Mitsubishi Corp. and Mitsui & Co. for $2 billion. BHP Billiton Ltd., Australia’s largest oil producer, agreed in December to sell its stake in Browse to PetroChina Co., that nation’s biggest energy producer, for $1.63 billion.
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