(IBTimes) - Woodside Petroleum agreed on Tuesday to sell its
14.7 per cent stake in the Browse gas fields to its Japanese
partners for $2 billion. However, the sale to Mitsubishi and
Mitsui would likely place a question mark if Mitsubishi and
Mitsui would build the liquefied natural gas (
) plant at James Price Point.
The sale reduces Woodside's share in the Browse venture to
31.3 per cent from 46 per cent. News of the sale caused
Woodside's shares to rise 3.41 per cent to $36.11.
Woodside Chief Executive Peter Coleman said the company is
reducing its holding in potential LNG developments to free up
more development cash and cut project risk. Most of the joint
venture partners of Browse have been pushing for piping the gas
further south to the existing North West Shelf plant at Karratha
when reserves run low towards the end of 2020.
The other Browse partners include the company Japan Australia,
which owns one sixth of the North West Shelf, and agreed to buy
from Woodside 1.5 million tonnes of LNG a year from the Browse
development. Japan Australia is the subsidiary of Mitsubishi and
The Browse project has a gross valuation of $13.6 billion.
Macquarie Group analysts said that amount is 35 per cent ahead of
their estimates. As investors accepted the implied value of the
deal on Browse, Woodside shares went up 4 per cent at early
trading in Sydney.
"Browse is a world-class resource and the level of interests
shown during this process reflects the strong ongoing demand for
LNG from premium developments such as this," Mr Coleman said in a
Browse is estimated to have 15.5 trillion cubic feet of
recoverable gas and more volumes of condensate. Woodside aims to
make its first shipment of LNG in 2017. It is designed to produce
12 million metric tonnes of fuel a year from three processing
units called trains.
The venture, however, is being opposed by environmental groups
and traditional land owners. The joint venture partners are also
in disagreement on the best methods to process the gas for
The federal government and Western Australia threatened in
late 2009 t00 remove the retention leases of the joint venture
over the gas resources if the companies do not agree to develop
the fields as quickly as possible.
While Woodside is in favour of the development of a new LNG
facility at James Price Point on the WA coast, some of its
partners such as BHP and Chevron would rather pipe the gas to the
existing North West Shelf LNG project.
"This deal will do little to discourage the market that Browse
gas could ultimately be taken back to the North West Shelf....
While this development option adds little to the net asset value,
as a cheaper development it considerably lowers the breakeven oil
price and therefore is less risky," The Wall Street Journal
quoted Macquarie analysts.
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