A FOUNDATION liquefied natural gas supply agreement for the $45 billion Woodside-led Browse project in Western Australia has lapsed, raising concerns that the already delayed mega-project will face stiffer competition for supply deals from competing gas export projects.
Woodside revealed yesterday the expiry by mutual agreement of a November 2007 deal with Taiwan’s CPC for the possible annual sale of two million to three million tonnes of LNG for 15-20 years from the planned 12 million-tonne-a-year Browse project.
Shipments in the life of the agreement could have been worth more than $US48bn ($47.9bn) at current prices.
The 2007 deal was for Browse to begin sending off shipments to Taiwan between next year and 2015. First production is now not expected until 2017 at the earliest, with a final investment decision delayed from midyear until the first half of next year.
Behind the delays are squabbling between the partners on the development, along with environmental and Aboriginal challenges to the choice of James Price Point on the Kimberley coast as the gas hub for Browse.
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The delays have not caused state-owned CPC any stress, as it had previously signed for two million tonnes of LNG annually for 20 years from Shell’s radical Prelude floating LNG project in the Browse Basin, as well as 1.75 million tonnes annually for 15 years from Inpex’s Ichthys project.
While delayed and subject to ongoing protests, Woodside remains confident about the potential of the Browse project.
Woodside’s Browse head, Michael Hession, said last month that Browse was a “world-class resource and we have the capacity to process up to 25 million tonnes a year at James Price Point”. That is more than twice the initial target of a 12 million-tonne-a-year project.
Dr Hession said Browse was overcoming its cost challenges, with plans to build more of the plant offshore and a new design that would cut operating costs. “The story for Browse does not end with this project… we are evaluating future opportunities within the Browse Basin region, in terms of acreage and partnerships,” he said.
Woodside is a 31.3 per cent partner and manager of the Browse project. Other partners are BP, Chevron, Japan’s Mitsui-Mitsubishi joint venture, Shell and BHP.
Dr Hession’s assessment of prospects for Browse’s eventual development, and its ultimate size, followed a $US2bn deal last month from selling a 14.7 per cent Woodside stake in Browse to the MiMi joint venture. MiMi, a one-sixth partner with Woodside in the North West Shelf gas project, also agreed to buy about 1.5 million tonnes a year of LNG from the Browse project, partly reversing the lapsing of the CPC agreement, and an earlier lapsing of one with PetroChina.