Woodside May Delay Decision on Browse LNG Project Until 2013

Woodside Petroleum Ltd., Australia’s second-largest oil producer, may delay an investment decision to develop the Browse liquefied natural gas venture by at least six months to 2013 as project costs climb.

The partners in the Browse venture, estimated to cost $36 billion, plan to ask the Western Australia state government to extend a deadline for a decision to the first half of 2013 from mid-2012, the Perth-based company said today in a statement.

Chief Executive Officer Peter Coleman is facing higher costs, funding challenges and sales competition from the U.S. as he seeks to develop more than A$70 billion ($70 billion) in LNG projects, including Browse. The partners may not proceed with the plan to build the project’s processing plant onshore at James Price Point, according to Credit Suisse AG.

“A James Price Point development is one of the more challenging” LNG projects in Australia, Ben Wilson, an analyst at JPMorgan Chase & Co., said by telephone today from Sydney. “We’ll see continued deferrals.”

Woodside dropped 3.4 percent to A$30.24 in Sydney trading, taking its decline to 29 percent this year. The benchmark S&P/ASX 200 Index fell 2.4 percent today and 14 percent this year.

The cost of building Browse at James Price Point on the Kimberley coast may have surged to $36 billion from an earlier estimate of $30 billion, Credit Suisse analysts led by Sandra McCullagh said last month. Woodside may decide to process Browse gas at an existing production hub at Karratha, they said.

Adding Realism

The statement from Woodside today “is in line with what Coleman has done so far -- add a bit of realism to the project estimates,” JPMorgan’s Wilson said.

Woodside remains “committed” to the plan for a new LNG hub at James Price Point, Coleman told reporters on a call.

The partners in the planned Browse project are Chevron Corp., Royal Dutch Shell Plc, BP Plc and BHP Billiton Ltd. The federal government, which wants oil and gas resources to be commercially developed as fast as possible, set the existing deadline two years ago. The companies were allowed to keep nine leases covering the Browse fields.

The partners are in talks on the planned request for amendments to the Browse leases, Woodside said.

“There’s a lot of work in front of us,” Coleman said today. “We’d rather not rush to the finish line and not have any breath left. These are big decisions.”

Woodside expects its Pluto LNG project in Western Australia to cost A$14.9 billion, the third increase since November 2009, the oil producer said in June. Pluto’s first cargoes are scheduled for March 2012, six months later than it had expected, Woodside said at the time.

“The project is progressing as we expected,” Coleman said today. “March is still firmly within our sights.”

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