Regional LNG: Woodside says LNG venture may approve 5th unit: Report

Woodside Petroleum Ltd., Australia's second-largest oil and gas company, said it expects the North West Shelf venture to approve building a fifth production unit by early next year provided it signs enough customers.

First liquefied natural gas output from the A$1.6 billion ($1.2 billion) unit was expected in 2008, said acting Woodside Chief Executive Keith Spence. The unit may supply re-contracted volumes for existing Japanese customers of the venture, off the northwestern coast, and a long-term contract in Korea, he said.

The North West Shelf venture, which includes Woodside's 34 percent shareholder Royal Dutch/Shell Group and ChevronTexaco Corp., had first planned to start the fifth line, or train, in 2006. It's vying with projects in Indonesia, Malaysia, the Middle East and Russia to win sales in Japan and South Korea, and in 2002 signed an agreement to supply LNG to southern China.

``I don't think there's much more they need to do'' before the venture can approve the fifth unit, said Paul Ashby, an oil and gas analyst at ABN Amro Australia Ltd. in Sydney. ``If you work out contracts already committed for the fourth train, plus China, you work out that they've probably ultimately filled up the fifth train with maybe just a few more that they need to sign perhaps in a few years' time.''

The venture's fourth LNG production line, which is on track to start up in mid-2004 at Karratha in Western Australia, is expected to ship its first cargo in September, Spence said. The fifth unit will be a ``look-alike'' to the fourth, which will have a capacity of 4.2 million tons a year and increase the venture's total capacity to almost 12 million tons a year, he said.

``We expect that by the end of this year or early next year we'll be coming to (a final investment decision) on train 5,'' Spence told reporters at the annual Australian Petroleum Production and Exploration Association conference in Canberra. ``We're certainly engaged with customers on re-contracting, with Japanese customers, but we expect that Korea Gas (Co.) will be probably issuing an invitation to tender for an LNG supply there in 2007- 08.''

BP Plc, BHP Billiton, Mitsui & Co. and Mitsubishi Corp. also have stakes in the North West Shelf venture.

The Woodside-led Sunrise gas project in the Timor Sea could start ``as early as 2009'', while another project could start up in 2012 based on gas from the Scott Reef, Brecknock and Brecknock South fields in the Browse Basin off northwestern Australia, Spence said.

Those schedules may be optimistic given the competition in the gas supply market, which may delay the Browse Basin project until at least 2016-17, ABN Amro's Ashby said.

``Clearly we've got a great new demand out there with China, of course, so I guess the market conditions have started to improve a bit, but there's a lot of gas out there in the world and a lot of different people looking for markets,'' Ashby said. (*)