From the Sydney Morning Herald
Woodside gas plant doubts
Peter Ker, Rania Spooner
December 20, 2011
HOPES that Woodside Petroleum will abandon plans to build a massive gas plant near Broome have been boosted by news that a final investment decision on the controversial $30 billion Browse LNG project will be delayed until 2013.
West Australian Premier Colin Barnett last night indicated his government was likely to accommodate Woodside’s request for the decision deadline to be relaxed from its present date of mid-2012 until some time in 2013.
While Woodside insists it remains committed to building the gas processing site at James Price Point near Broome, multiple analysts said the delay further enhanced the prospect that a cheaper, less contentious site would be selected to process the Browse gas.
Woodside has faced pressure from environmental, indigenous and other community groups to abandon the Kimberley site, while the company’s joint venture partners – BHP Billiton, Shell, BP and Chevron – are also believed to prefer cheaper alternatives.
The joint venture partners are believed to prefer a plan to process the gas at the existing North-West Shelf facility near Karratha, and analysts at Goldman Sachs said yesterday that option was a ”realistic fall-back” which ”increases in attractiveness as time goes on”.
Woodside chief executive Peter Coleman said the company remained committed to James Price Point but would keep a ”weather eye” on other options.
The severe inflationary environment in Western Australia is adding to pressure on the Browse business case, and Mr Coleman said the financial viability of the James Price Point option would become clearer over the next three months when tender bids started to arrive.
”I’m going to start getting some pretty good signals around that time as to where the costs are going,” he said.
In a reference to cost pressures, Mr Coleman said he expected contractors to come back with bids that were ”conditional” on certain price outcomes.
Mr Coleman said the delay request was lodged because of difficulties in digesting large amounts of information before putting out tender documents.
”We just don’t feel we’ve got adequate time at this point to properly evaluate those documents when they come back in,” he said yesterday.
While many analysts now expect Woodside to eventually abandon the James Price Point plan, most agree that the stock represents good value at yesterday’s closing price of $30.24.
Mr Coleman has tempered ambitious targets on several Woodside projects since becoming chief executive in May, and RBS analyst Jason Mabee said the share price was unlikely to continue the losing streak it had been on since the stock was worth more than $48 in April.
”You’ve got to think most of the bad news is out now … I think it is good value for sure,” he said.
The Wilderness Society, which has long campaigned against the James Price Point option, said the continual setbacks for the Browse project were ”testament to the misguided egos” of those who had pushed for ambitious deadlines and targets.