WOODSIDE Petroleum has lost a foundation customer for its key Browse liquefied natural gas project in Australia after a A45 bn (40,1 bn) pact to sell gas to PetroChina expired.

Woodside, Australia’s second- largest oil and gas producer, said
yesterday the initial deal with PetroChina, signed in 2007 for the
potential sale of 2-million to 3- million ton s a year of gas from the
Browse project , expired on December 31 and the two parties were not
able to reach an agreement to extend the deal.

Perth-based Woodside said, however, that a separate agreement with
Taiwan’s CPC Corporation remained in place and that it was also in gas
sale talks with Japan’s Osaka Gas over other projects, including a
potential sale of up to 1,5-million tons a year of liquefied natural
gas from the Browse project.

Analysts remain bullish about Asia’s demand for gas after 2015 and said
the lapse of the PetroChina deal was not necessarily a blow to the
project.

“Asian demand is very strong and looking at the string of recent deals
signed, I doubt Woodside will have problems finding other buyers to
take up the 2-million to 3-million ton s booked by PetroChina,” said an
energy analyst from an investment bank.

“Other Chinese buyers may come back to the negotiating table, while
Woodside could potentially get a better deal with Osaka Gas or other
Japanese customers that already have a long- standing relationship
under the North West Shelf project.”

China hoped to clinch more gas import deals and take advantage of
excess supply in the market to speed up negotiations of overseas gas
purchases, China’s energy head said.

UBS energy analyst Gordon Ramsay said should discussions with Osaka Gas
and CPC be successful, Woodside would lock in between 3,5-million and
4,5-million tons a year of gas sales from Browse — a large part of the
6- million ton s of equity gas it needs to sell.

Woodside CE Don Voelte said in August the preliminary gas sale agreement with PetroChina was valued at about A45 bn.

Woodside, the operator and 50%-owner of Browse, has been locked in a
tussle with its four partners — BP, Chevron, Royal Dutch Shell and BHP
Billiton — over the site of the gas processing plant for the proposed
12-million- tons-a-year development.

But the project gained momentum last month after the Browse partners
accepted a government deadline to decide by April how to develop the
project in Western Australia. An investment decision is targeted by
mid-2012.

“Whereas once these (sales) agreements provided a strong case for
Browse moving forward, the recent government ruling on retention leases
is now the clear driving factor in the timely development of Browse,”
UBS’s Ramsay said .

Source: Reuters

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