Australia's Browse LNG gets more time for investment decision

Reuters, Tuesday 10 Apr 2012

In its quest to overtake the spot of Qatar as top world exporter of Liquefied Natural Gas, Australia gives investors in its Browse LNG project more time to finalise their decision

Australia has given partners in the Browse liquefied natural gas project off its western coast more time to reach a final investment decision, as attempts are made to end in-fighting and quell opposition from environmentalists and landowners.

Australia has set a course of overtaking Qatar as the world's top exporter of LNG later this decade. Browse is one of a handful of LNG projects costing tens of billions of dollars under evaluation in the country.

Australia's federal and Western Australian state governments said on Tuesday each had approved amendments to so-called retention leases for the Browse Basin where the gas is located, which include extending the deadline for a final investment decision until the first half of 2013 from mid-2012.

The project has been dogged by a dispute among the partners -- Woodside Petroleum, Shell, BP, Chevron, and BHP Billiton -- over the best location to process the gas. There is also mounting external opposition to building a gas processing plant at James Price Point, which is favoured by Woodside.

"The variation will allow time to better evaluate the outcomes of front-end engineering and design work and the results of the tender processes for the development's major contracts," Woodside said in a statement to the Australian Securities Exchange.

Fifty-per cent partner Woodside in February said there were bidders for a minority stake in the project and it hoped to decide on a deal in the next few months.

China National Petroleum Corp, Japan's Osaka Gas Co , Mitsui & Co and Taiwan's CPC Corp are among bidders for the stake, sources with knowledge of a deal said at the time.

A sale would help extract early value from the project, which analysts have estimated could cost around A$30 billion.

But it also comes amid a softening in gas prices, which have dropped by nearly a third so far this year.

The Australian Conservation Foundation (ACF) is battling construction of a plant to process gas from the project along the Kimberley coastline, a remote and environmentally sensitive region in far northwestern Australia.

Environmentalists and some indigenous landowner groups want the gas piped to other locations, which they say could include areas around the existing North West Shelf gas hub further south.

"We're not against processing of the Browse gas but we think the pristine Kimberley coastline is not the place for that to happen," said Josh Meadows, an ACF spokesman. "There are facilities that are viable elsewhere."

The state government has been locked in battle with conservationists and indigenous residents over plans to compulsorily acquire the James Price Point site.

Woodside has argued the development will inject much-needed funds into the local economy, while those opposed claim the site is culturally and environmentally significant.

The Browse project also is facing a pricey labour market as well as a recently approved carbon tax. Analysts say the tax should initially have only a minor impact on the bottom line of new projects, but will inevitably erode profit margins, particularly for projects with high carbon dioxide content in the raw gas.

Japan's Inpex Corp in January signed around $70 billion worth of LNG sales and equity agreements from its Ichthys project in Australia, laying the foundations for a final investment decision on the project early next year.

Woodside dropped 1.4 per cent to $34.69, outpacing more modest declines in the broader market.

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