By Rebecca Keenan (Bloomberg) – Woodside Petroleum Ltd., operator of Australia’s oldest liquefied natural gas plant, is seeking inspiration from the U.S. Gulf Coast.
The North West Shelf venture in Dampier will allow third parties to pay a tolling fee to process their gas into LNG, Woodside Managing Director Peter Coleman said Friday in Perth. The plant, operating since 1989, will have spare capacity by the mid 2020s to handle the new production, he said.
The new model is similar to U.S. plants, led by Cheniere Energy Inc.’s Louisiana terminal, which rent out liquefaction capabilities, leaving clients to handle buying the gas and selling the LNG. So-called “tolling agreements” are a break from the past in Australia, where companies traditionally combined exploration, pipelines and liquefaction into multi-billion-dollar projects, with partners owning everything from the gas molecules to the export jetties.
“We believe the North West Shelf can be one of the most competitive tolling structures in the world,” Coleman said. “If you look at similar tolls in, for example, the Gulf of Mexico, which range anywhere from $2.75 to $3.75 for processing, we believe the North West Shelf can beat those numbers.”
Cheniere charges Royal Dutch Shell Plc, Gas Natural SDG SA and Korea Gas Corp. between $2.25-$3 per million British thermal units to liquefy shale gas and load it on tankers. The pricing structure, similar to pipeline tariffs, means the company isn’t exposed to commodity price swings.
The venture’s tolling arrangement, which Coleman said could be in place by the end of next month, would offer space in its plant to companies with untapped gas reservoirs offshore northwest Australia. There are three or four such ventures, Coleman said, including Woodside’s own Browse project and Exxon Mobil Corp.’s Scarborough, which Woodside bought into last year.
Woodside had planned several years ago to build a floating liquefaction terminal 425 kilometers (260 miles) off the coast of Australia to produce LNG from the Browse fields. Now it’s considering a pipeline to an onshore plant. That could be the North West Shelf venture if Woodside and its five other partners agree that Browse is the best candidate, Coleman said.
The North West Shelf project is a partnership between operator Woodside, BHP Billiton Ltd., BP Plc, Chevron Corp., Royal Dutch Shell Plc and a joint-venture of Mitsubishi Corp. and Mitsui & Co.
Gas production is declining at many of the fields that feed the projects and the large consortium of owners has been unable to agree on which fields to drill to make up for the loss, said Zhi Xin Chong, a Singapore-based LNG analyst with Wood Mackenzie Ltd.
“A third-party structure that doesn’t advantage any of the partners present in upstream is one way of getting alignment between all the joint venture members,” he said.