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Mitsubishi, Mitsui End Deal to Buy LNG From Woodside Project

Jan. 2 (Bloomberg) -- Mitsubishi Corp., Japan’s biggest trading company, and Mitsui & Co. withdrew from an agreement to buy liquefied natural gas from Woodside Petroleum Ltd.’s Browse venture in Australia after delays to the project.

The Mitsui and Mitsubishi venture, Japan Australia LNG Pty, won’t go ahead with the purchase of about 1.5 million metric tons of LNG annually from Browse because the deal depended on the project reaching an investment decision by the end of 2013, Perth-based Woodside said today in a statement.

“If they are looking for 1.5 million tons of LNG, there are going to be plenty of options opening up,” Andrew Williams, a Melbourne-based analyst at RBC Capital Markets, said today by phone, adding that the Japanese companies could choose to become Browse customers later. “It’s pretty hard for these guys to sit around and keep a commitment” for a project that hasn’t yet started the engineering and design phase, he said.

Woodside, Australia’s second-largest oil and gas producer, scrapped a plan last year to build Browse onshore in Western Australia, estimating later it would have cost more than A$80 billion ($71 billion). Instead, the company plans to decide in mid-2015 whether to proceed with a plan to liquefy the gas on giant ships offshore, using Royal Dutch Shell Plc technology.

Asian Market

The Japanese companies, which reached a deal in 2012 to buy a 14.7 percent stake in Browse for $2 billion, will continue to work with Woodside to jointly sell LNG from the venture to the Asian market, according to the statement.

Woodside fell 0.6 percent to A$38.67 at 3:10 p.m. Sydney time. Australia’s benchmark index rose 0.5 percent.

The Australian company remains in talks with other regional customers to sell gas from its LNG projects, including Browse, according to the statement. PetroChina Co., Shell and BP Plc are also partners in the Browse development.

“It’s going to be an extremely competitive environment for gas sellers over the remainder of the decade,” Williams of RBC Capital said.

Global demand for LNG is growing at a very fast pace, Woodside said today in an e-mailed response to questions. “Woodside believes Browse will play an important part in future regional supply of safe and reliable LNG.”

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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