Woodside’s $16 billion Scarborough LNG project is a step closer to reality after US investment giant Global Infrastructure Partners signed up for 49 per cent of a new $US5.6 billion ($7.64 billion) gas processing train at Pluto.
The project is vital to Woodside which in the past month has downgraded reserve estimates for its gas fields feeding the Wheatstone and Pluto LNG plants in WA’s Pilbara.
Woodside plans to double the capacity of its Pluto LNG plant in WA’s Pilbara region.Credit: Supplied
Pluto marks GIP’s third investment in Australian LNG plants in 12 months despite questions about the fuel’s long-term role in the Asian energy mix as decarbonisation efforts step up.
The deal announced on Monday relieves Woodside from fully funding the project if its purchase of BHP’s petroleum division, which owns 26.5 per cent of the Scarborough field, goes ahead.
GIP will pay Woodside $US835 million in addition to its 49 per cent share of the cost of a second LNG train at Woodside’s Pluto project but if cost, schedule, regulatory approvals or emissions liabilities do not go to plan Woodside will bear most of the risk.
The Scarborough project could have first gas production in 2026 and will require 430 kilometres export trunkline to connect it to the onshore Pluto gas plant on the Burrup Peninsula for processing.
Woodside will reap all the savings if the final cost is less than the current estimate of $US5.6 billion but it is also fully exposed to the potential for a cost blowout of up to a maximum of 30 per cent. The train will be built by Bechtel that has a relatively good record of restricting cost and schedule blowouts on Australian LNG plants.
Woodside will also have to compensate GIP if the liability for direct emissions rises above agreed levels and in some circumstances if the start-up of the train is delayed. The US-based fund can also sell its interests back to Woodside if “the status of key regulatory approvals materially changes”.
Credit Suisse analyst Saul Kavonic said the $US835 million carry payment looked strong for Woodside. “But in return for that Woodside is assuming a greater share of construction risk despite management indicating in the past they would be sharing it or fully with any partner,” he said.
