Australia’s LNG projects in ‘urgent need’ for regulatory reform to secure domestic supply, CEO Woodside says

Woodside Energy Group Ltd. has announced that one of its projects to expand Australia’s LNG exports is nearly half complete, but chief executive Meg O’Neill said the country’s regulatory process could undermine the firm’s ability to secure foreign investment and domestic natural gas supplies.

As part of the company’s third-quarter earnings release, O’Neill said the construction business for the company Scarborough Fields and the second train for its Pluto LNG terminal started up during this period. She said the project is now about 46% complete.

However, the Australian Federal Court ruled in late September that the seismic survey for the offshore work on the Scarborough project was invalid. O’Neill said the decision did not affect the company’s timeline for shipping the first cargo Scarborough gas from Pluto by 2026, but “highlighted the urgent need to reform” the country’s regulatory process.

“Uncertainty over approvals has the potential to increase costs and delay any offshore activities to be undertaken in Australia,” Mr O’Neill said. “For gas projects, such uncertainty threatens the delivery of much-needed new supplies to the domestic market in Western Australia and also undermines the confidence of our regional trading partners.”

Woodside is working to stabilize supplies to its Pluto LNG facility on Australia’s northwest coast interconnection projects process third party gas and through the development of a scarborough field clutch. Tea Scarborough Field is about 230 miles off the coast of Western Australia and is estimated to contain natural gas reserves of 11.1 Tcf.

It is also key to Woodside’s plans to add an additional 5 million metric tons per year (mmty) to Pluto, bringing its total capacity to nearly 10 mmty.

Tensions are rising between Australia’s energy regulators and LNG exporters as prices impact on consumers declining domestic natural gas production grow. Without further investment in domestic supply, major Australian exporters such as Chevron Corp., Shell plc and Woodside said government support for LNG export projects and offshore production would be needed for the firms. domestic supply contracts over the decades.

However, concerns over the potential forced diversion of LNG cargoes for domestic supply and tighter climate policies are pushing some of Australia’s biggest foreign energy investors in Japan to reevaluate investments.

The Australian Energy Market Operator (AEMO) announced earlier in the year that there could be underinvestment in generation even more pressure on exporters to redirect spot costs to domestic markets after 2027 as production from southern fields continues to decline.

‚ÄúScarborough’s importance to regional energy security became apparent in August when LNG Japan Corp. has agreed to purchase a 10% non-participating interest in the joint venture,” O’Neill said.

Woodside’s LNG sales for its Australian assets in Q3 2023 rose slightly compared to the previous quarter ended in June, reaching 21.5 million boe. However, sales fell compared to 23.2 million boe in the year-ago period.

It also sold less portfolio gas in the quarter, selling 4.3 million boe in 3Q2023 compared with 5 million boe in the same period last year.

The company increased its share of LNG related to gas mushroom indices from 25% in 2Q2022 to 29% during 3Q2023.

However, the decreasing volatility in the global gas market compared to last year’s hectic summer reduce Woodside’s realized prices for LNG. The realized price for Australian volumes fell to $10.30/MMBtu during the quarter from $19.10 in 3Q2022. Its traded volumes also fell to $8.20 from $32.70 a year earlier.

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Woodside uses volumes from Cheniere Energy Inc.’s LNG terminal. Corpus Christi, Texas secure and capture increased prices in Europe. Last year Woodside agreed to supply one of them Europe’s largest energy company, Uniper SEup by more than 0.8 mmty since January.

Woodside has also made moves to increase its available volumes of US LNG with 20-year agreements Commonwealth LNG which would give the company access to up to 2.5 mmty from the proposed Commonwealth Terminal near Cameron, LA. Commonwealth loves it approve the project early next year and will deliver its first cargo sometime in 2027.

Total production fell to 47.8 million boe in 3Q2023 compared to 51.2 million boe a year earlier.

Woodside did not release 3Q2023 net profit or loss results. In August, the company reported net profit after tax for the first six months of the year of $1.7 billion. Year-end results are expected to be released on December 31.

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