INTERVIEW: Australia strikes may not substantially curb LNG output even if it escalates: Woodside CEO

The looming industrial action at Chevron's Gorgon and Wheatstone LNG facilities in Australia starting Sept. 7 "will not substantially curtail production" even if it escalates further, Woodside Energy CEO Meg O'Neill said Sept. 5.

Woodside has a 13% stake in the 8.9 million mt/year Wheatstone project operated by Chevron. Together with the Chevron-operated 15.6 million mt/year Gorgon project, it makes among the largest resource developments in Australia.

"The industrial action that is starting Thursday [Sept. 7] is something I think Chevron will find challenging but will not substantially curtail production if it escalates beyond that," O'Neill said in an interview with S&P Global Commodity Insights on the sidelines of the Gastech conference in Singapore.

"Look it's hard to say, I think you should probably ask Chevron those questions about how they see the prospects of resolving the dispute."

O'Neill's comments came after Woodside recently reached an in-principle agreement with the Offshore Alliance on an enterprise agreement covering employees on its platforms that feed gas to its North West Shelf LNG project.

"I know the potential industrial issue is concerning to many buyers," O'Neill said, when asked whether threats of industrial action in Australia impacting foreign interests on Australian LNG supply and its role as a stable supplier.

"That's part of how the negotiations [are] going in Australia."

"We are very pleased that we were able to come to agreement with our workforce two weeks ago and avoid any industrial action," O'Neill said. "So, we do think we continue to be a very trustworthy and reliable supplier of LNG."

Scarborough project

Woodside, meanwhile, is in talks with prospective partners in the Scarborough project after recent signing of agreements with LNG Japan, under which it will sell a 10% non-operating participating interest in its wholly owned Scarborough Joint Venture and sell 12 LNG cargoes/year (about 900,000 mt/year) for 10 years from 2026.

Once the Scarborough project comes onstream, LNG Japan would lift up to 1.7 million mt/year of LNG from a heads of agreement for the sale and purchase of 900,000 mt/year, together with its equity LNG offtake of up to 800,000 million mt/year from the project.

"With LNG Japan, we were very delighted with the quality of that partner and the price they were paying. We would be happy to bring in another partner in," O'Neill said when asked whether Woodside was willing to sell more stakes in the Scarborough project to the Japanese or other companies.

"We do continue to have discussion with prospective partners," O'Neill said.

Asked about the economics of the Scarborough project, following amendments to the Safeguard Mechanism, O'Neill said: "There is very minimal impact of the new Safeguard Mechanism on Scarborough. The CO2 content in reservoir gas is very low, less than 0.1%. So, there is very limited impact from that perspective."

"Now for the onshore facilities, we do need to bring our emissions down as the base line declines," O'Neill said. "So we are working very hard with our operating business to find ideas to come up with ways to bring down our Pluto site emissions."

Under reforms to the Safeguard Mechanism that came into effect July 1, industrial facilities, including oil and gas production and mining operations, which emit more than 100,000 mt/year of CO2 equivalent must offset CO2 emissions through steps such as purchasing carbon credits or carbon capture and storage.

The mechanism requires affected facilities to cut net emissions by 4.9% annually through 2030, while new facilities, including gas fields, are expected to have a baseline of net-zero emissions from the start of operations.

Lean LNG

Asked whether the Scarborough project will produce lean LNG, which might not be favored by Japanese end-users that typically favor rich LNG, O'Neill said: "Correct it is quite lean LNG."

"We have heard from some customers that they continue to prefer the rich LNG that we have historically produced," O'Neill added. "The first few years that Scarborough is online, the gas will be blended with Pluto so the Pluto Scarborough blend will meet many Japanese customers' expectations."

Scarborough gas will be processed at the Pluto LNG facility, where Woodside is currently constructing Pluto Train 2. Woodside is also the operator of the Pluto Train 2 Joint Venture and holds a 51% participating interest.

The Scarborough Joint Venture comprises the Scarborough field located approximately 375 km off the coast of Western Australia. The Scarborough field will supply gas to support the production of up to 8 million mt/year of LNG and domestic gas equivalent to 15% of LNG output, which will be reserved for domestic use in support of the State of Western Australia's domestic gas policy.

About 5 million mt/year of Scarborough gas will be processed through Pluto Train 2, with up to 3 million mt/year processed through the existing Pluto Train 1, with the project targets the first LNG cargo in 2026 after a final investment decision in November 2021.

Asked about the impact from a series of Australia's policy changes on Woodside's current and future projects, O'Neill said: "Certainly not current project. For future projects, we have been very clear with the government that we need to have a fiscal and regulatory stability; we need to be able to make an investment with a predictable outcome."