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Making LNG marriages work: Woodsides ONeill

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O’Neill is philosophically positive about the challenges of reaching agreement within the North West Shelf venture, one of the most complex petroleum joint ventures worldwide.

“Think about it as a marriage of six people,” she says in an interview in Perth.

“You have days when you love each other and you’re going to have days where you just don’t want to wake up next to that person, but the reality is you’ve made a commitment so you figure out ways to make it work.”

The motivation for a deal is strong on both sides. For Browse, after several false starts including the controversial James Price Point plan on the Kimberley coast, the potential to process the 13.9 trillion cubic feet (tcf) of gas through an existing LNG plant offers the chance to stand up to increasing overseas competition.

For the North West Shelf, the looming depletion of the venture’s own gas fields means utilisation of their five LNG trains will fall unless replacement gas is secured.

O’Neill appears quietly confident that the Browse deal will be reached by Woodside’s year-end target, despite Chevron holding out. She points to a commitment given at a meeting in early November by all parties to that effect.

“There will be a point in time when the players come together and there will be something that catalyses it to conclude, so we are just working towards that end,” she says.

“The stars are really aligning that this is the right time and the right concept for Browse.”

As time passes, however, the prospect increases that the North West Shelf LNG production will decline as its fields mature, with Browse gas only coming online in 2026.

Woodside’s plan to build a pipeline between the Pluto and North West Shelf LNG plants near Karratha – a key element of its Burrup Hub concept – will go some way to addressing that, allowing gas flowing into Pluto LNG to be sent on to North West Shelf.

“Part of why we have been pushing this interconnector between Pluto and North West Shelf is to deal with exactly that,” says O’Neill, who joined Woodside in May 2018 initially as chief operations officer.

The North West Shelf is expected to start running down in 2021, and while the interconnector is timed to start up in 2022, all parties are looking to accelerate that, she said.

At the same time, discussions are taking place on bringing other third-party gas into the North West Shelf, including from Beach Energy’s Waitsia field, although O’Neill notes that any onshore producer would need to secure approvals to export their gas.

In total, Woodside estimates the Burrup Hub will see up to 25tcf of gas off the WA coast brought online, underpinning several more decades of production at the North West Shelf and Pluto LNG plants.

Total capex is put at $52 billion through to 2063, with more than 4600 jobs created at peak construction in 2023, and almost 1100 ongoing jobs. ACIL Allen puts the estimated boost to GDP at $414 billion through to 2063.

Despite the negotiations, O’Neill describes the Burrup Hub as “a fantastic example of what you can do when you’ve got parties working together”, pointing to the work by four joint ventures – North West Shelf, Pluto, Browse and Scarborough – to make the most of gas resources and existing infrastructure.

“I think there is more collaboration than you might interpret from some of the commercial discussions,” she says

“The commercial discussions that you are seeing on the North West Shelf are between North West Shelf and Browse – I don’t think that’s indicative of poor collaboration, that’s just saying that people are protecting value and balancing value and risk.”

The gas processing deals illustrate a broader change sweeping over the LNG sector as LNG plants become processors of third-party gas, perhaps more suited to infrastructure investors than gas producers.

O’Neill acknowledges that may cause a rethink by some on whether they remain owners of what will be infrastructure that yields lower returns than resources development.

“Those will be really interesting questions for all of the joint venture partners – Woodside included – about where we want to have our money tied up going into the future,” she says.

“There’s potentially a point in time where you could say that this is a different sort of business to the business that Woodside is currently in today, but I probably wouldn’t place any wagers on how fast that would happen.”

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