Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, said first-half profit fell 12 percent on lower oil prices. The shares rose as Woodside said the Pluto liquefied

natural gas plant’s expansion is progressing.

Net income dropped to A$898 million ($744 million) in the six months
ended June 30, from A$1.02 billion, Perth-based Woodside said in a
statement today. That compares with a market consensus of A$878 million
cited by UBS AG.

The oil industry scrapped or delayed $170 billion worth of projects
between October and mid-April as crude futures fell by more than half
since peaking at $147.27 a barrel July last year, according to the
International Energy Agency. The A$12 billion Pluto project in Western
Australia is due to start production from its second unit in 2013, and
a third in 2014, with two more to follow, Woodside said today.

“The information the Pluto trains 2 and 3 are progressing will be
welcomed by the market,” said David Wall, oil and gas analyst at
Hartleys Ltd. in Perth. “This is the stage of the project that you
would see slippages if there were to be any.”

Woodside climbed A$1.56, or 3.7 percent, to A$44.28 in Sydney, the
biggest gain in three months. The benchmark S&P/ASX 200 Index
dropped 0.2 percent.

Ahead of Gorgon

Pluto’s first production unit is more than 70 percent complete, and is
expected to be 85 percent finished by year end, Chief Executive Officer
Don Voelte said today. Front-end engineering and design work is
starting on the second and third LNG trains, which are progressing
faster than the rival Chevron Corp.-operated Gorgon project, he said.

“We’ll build train two and three before Gorgon,” Voelte said on a
conference call. “We’ll be 12 to 18 months in front of Gorgon on people
requirements and needs.”

More than 12 LNG projects proposed for Australia and Papua New Guinea
are competing for multiyear contracts from Asian buyers, seeking to tap
rising demand for cleaner-burning fuels. PetroChina Co. yesterday
signed a 20-year, A$50 billion accord to buy LNG from Exxon Mobil
Corp.’s share of Gorgon gas.

Design and engineering work on the second and third Pluto trains will
cost as much as A$150 million, Voelte said. Kansai Electric Power Co.,
Japan’s second-largest power producer, and Tokyo Gas Co., its largest
distributor of the fuel, which own a combined 10 percent of Pluto, will
take an equal stake in the Pluto 2 and Pluto 3 processing plants, he
said.

Gas Talks

Talks are under way with five companies to supply additional gas for
the Pluto project, Voelte said. Hess Corp., the fifth-biggest U.S. oil
company, said last month it was in discussions with Woodside. Apache
Corp. and a unit of Kuwait Petroleum Corp. said in May discussions on
supply had started.

An exploration program to dril more than 20 wells in Western
Australia’s Carnarvon Basin will start in the fourth quarter of 2009,
Woodside said. The discovery of between 1.4 trillion to 2.7 trillion
cubic feet of gas is needed to supply the second production unit at
Pluto, Voelte said.

Sales dropped 21 percent to A$2.03 billion in the first half from
A$2.57 billion a year earlier, Woodside said. The slump in oil prices
outweighed a 9.9 percent gain in Woodside’s first-half production to
40.1 million barrels of oil equivalent as fields came on line in the
U.S. and Australia.

Woodside, 34 percent owned by Royal Dutch Shell Plc, maintained its
full-year production forecast of 81 million to 86 million barrels of
oil equivalent.

The Australian company may produce as much as 20 million tons of LNG a
year by 2020 from processing units at Pluto and the proposed Sunrise
and Browse developments, Voelte said.

“Voelte has been a visionary,” Hartleys analyst Wall said. “While he’s
probably stepped on a few toes, with Pluto he’s also managed to create
what will be the fastest LNG project in the world, from exploration to
production. That’s a major achievement.”

LNG is natural gas that has been chilled to liquid form, reducing it to
one-six-hundredth of its original volume at minus 161 degrees Celsius
(minus 259 Fahrenheit), for transportation by ship to destinations not
connected by pipeline.

Source: Bloomberg

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