Woodside Defers FID on Key Projects
Australian Woodside Petroleum has deferred targeted final investment decisions (FID) on Scarborough, Pluto Train 2 and Browse and slashed approximately 50% in forecast 2020 total expenditure in response to uncertain market conditions created by low oil prices and Covid-19 outbreak, it said on March 27.
Total expenditure in 2020 is expected to reduce to approximately US$2.4bn. This includes an approximately US$100mn reduction in operating expenditure and an approximately 60% reduction in investment expenditure to US$1.7 – 1.9bn, Woodside said.
Woodside will change the planned turnaround schedule at Karratha gas plant, with the turnaround for LNG Train 3 deferred to September 2020 and the turnaround for LNG Train 4 deferred to August 2021. It will delay target FID for US$11bn Scarborough project, which it owns with BHP, and Pluto Train 2 to 2021. The FID on Scarborough was expected in the first half of this year.
The FID on US$20bn Browse has been deferred to an unspecified date. The Browse joint venture partners are Woodside (30.6%), European majors Shell (27%) and BP (17.33%); a Mitsui-Mitsubishi joint venture (14.4%); and PetroChina (10.67%).
Both Scarborough and Browse projects are key to Woodside’s plan to triple its oil and gas reserves in less than a decade.
“These are extraordinary times, that no one could have foreseen, but Woodside enters this period of significant uncertainty with one of the stronger balance sheets in our industry,” CEO Peter Coleman said in a statement.
Woodside has, however, kept its 2020 production guidance unchanged at 97 – 103mn boe. It said that LNG and oil production have not reduced, and deliveries to customers have continued.
“Woodside has a high-quality, investment-grade customer base, and deliveries and performance under contracted arrangements have not been adversely impacted by recent events. Demand has proven resilient for Woodside’s product in core north Asian markets,” it said.
The full impact of lower oil price will not be realised until late Q2 2020 due to the lag between the oil price and realised LNG price, the company said. To reduce exposure to potential further downside and increase revenue certainty, Woodside has hedged 11.85mn barrels of oil between April and December 2020 at an average price of US$33.47/barrel.
Woodside has also agreed with a customer to fix the price of approximately 2.4mn boe of LNG production over the same period, to further increase revenue certainty.