Woodside, BHP Approve $12bn Scarborough LNG Project

Woodside Petroleum and BHP have given the go-ahead to spend $12 billion developing a new gas field off Western Australia and expand the Pluto liquified natural gas plant near Karratha in the northwest.

The approval on Monday came at the same time that Woodside and BHP signed an agreement to merge BHP’s petroleum arm into Woodside to create a global top-10 independent oil and gas producer, as first announced in August.

“Today’s decisions set Woodside on a transformative path. Scarborough will be a significant contributor to Woodside’s cash flows, the funding of future developments and new energy products, and shareholder returns,” Woodside CEO Meg O’Neill said in a statement.

The Scarborough and Pluto Train 2 project is seen as essential to the future of Woodside, Australia’s biggest independent oil and gas company, which has seen limited growth over the past several years.

The final investment decision for the project was deferred in March last year when oil and gas prices crashed amid the Covid-19 pandemic.

Scarborough will be able to produce 8 million tonnes a year of LNG for export and 180 terajoules a day of gas for the domestic market. Customers have already signed up to buy about 60% of Scarborough capacity, including gas for a proposed urea plant in Western Australia, O’Neill said.

Scarborough gas, which will be processed through Pluto Train 2, will be one of the lowest carbon intensity sources of LNG delivered to customers in north Asia, Woodside says.

Woodside’s $6.9bn Share

Woodside said the all-in cost of supply for LNG delivered to north Asia would be around $5.80 per million British thermal units (MMBtu). That compares with a current Asia LNG spot price around $37 per MMBtu.

Woodside’s share of investment in the project is $6.9 billion. BHP on Monday signed off on $1.5 billion in spending for the first phase of Scarborough development. It is not a stakeholder in the Pluto LNG plant.

Woodside aims to send its first shipload in 2026.

“The final investment decision is underpinned by quality customer support with approximately 60% of Scarborough capacity contracted, including domestic gas for the proposed Perdaman urea project, ” O’Neill said.

Perdaman is a urea fertiliser plant proposed at an industrial site about 20km northwest of Karratha.

Green Groups Bid to Block Project

The Scarborough project is Australia’s biggest fossil fuel investment for close to a decade and has been opposed by local conservationists, who say it will boost greenhouse gases emissions by millions of tonnes a year.

The company says the proposed second processing facility, Pluto Train 2, is designed to be more energy-efficient and use improved technology to generate gas that would be “one of the lowest carbon intensity sources of LNG delivered to customers in north Asia.”

Gas from the Scarborough field would amount to about 10% of Australia’s LNG exports in the future, energy experts have said.

However, the Morrison government in Canberra and many in Asia regard gas as a crucial ‘bridging’ fuel to help wean the planet off coal and oil before full adoption of renewables and cleaner alternatives in coming decades.

Green groups have sought to delay, if not derail, the project, amid concerns about gas emissions worsening climate change.

O’Neill dismissed concerns about remaining environmental approvals still pending for the project.

“As we work through the series of secondary approvals, it is entirely possible that the regulators will ask us to take additional steps, and that’s quite normal,” she told Reuters.

A court will hold its first hearing on December 20 on a case brought last year by the Conservation Council of Western Australia (CCWA). The case challenges the state’s approval, without a full environmental review, allowing Woodside to process gas at the Pluto LNG plant from an expanded number of fields.

The CCWA said on Monday it would continue with a coordinated national campaign against Scarborough gas.

• Reuters and Jim Pollard