Woodside Finds Gas Offshore Australia; Profit Down 4%
SYDNEY - Woodside Petroleum Ltd. said Wednesday its hopes of expanding its A$14.9 billion Pluto gas-export project in Western Australia have been boosted by a large offshore natural gas discovery, as it reported a modest fall in annual net profit.
Australia's largest standalone oil and gas producer by output said the Ragnar-1 well intersected 190 meters of gross gas. It intends to drill three more exploration wells in the coming months, while also talking to potential third-party suppliers to Pluto with gas fields nearby.
Woodside wants to expand Pluto to tap an expected surge in demand for cleaner-burning fuels from Asia. Fast-developing economies such as China are emerging as major buyers of Australian liquefied natural gas while Japan, a traditional customer, needs more natural gas to substitute for lower nuclear power output in the wake of the Fukushima reactor shutdown.
The Perth-based company said Pluto's foundation stage remains on track to ship its first LNG cargo to Asian customers next month. This refreshed guidance provided some relief to investors accustomed to delays and cost blowouts at Pluto, combining with the gas discovery to push Woodside's shares up over 2% Wednesday.
Three previous delays to Pluto's foundation stage forced Woodside to source LNG cargoes externally to meet pre-arranged customer commitments. For the 2011 calendar year, the company booked a A$165 million "delay mitigation cost", contributing to a 4.3% fall in its annual net profit to $1.51 billion from $1.58 billion in 2010.
Underlying profit, which smoothes out one-off items, rose 17% to $1.66 billion on higher oil and gas prices.
Analysts say potential third-party gas suppliers to Pluto likely include Hess Corp., along with BHP Billiton Ltd. and ExxonMobil Corp.'s Scarborough joint venture.
Talks with potential suppliers should be wrapped up by the middle of 2012, possibly spilling into the third quarter, when the company should have a better picture of the size of its own gas resource, Woodside Chief Executive Peter Coleman told analysts.
Although the successful Ragnar-1 well is much further out to sea than the original Pluto discovery, and sits closer to Scarborough, Coleman said it could still be a commercially viable contributor to a new LNG production unit fed with Woodside's gas.
The company's other big LNG developments, Browse and Sunrise, are plagued with uncertainty and Coleman said Woodside is closely looking at new offshore expansion opportunities, without being specific.
Woodside is trying to sell part of its 46% stake in the Browse gas resource offshore northern Australia and a related new onshore LNG project at James Price Point. It said Wednesday the size of the resource has increased by 17% to 15.5 trillion cubic feet of gas.
But the company's complex development plan for the resource has angered environmentalists and some traditional landowners, will be expensive to execute, and some of the Browse joint venture partners would rather see the gas processed at the existing North West Shelf LNG facility.
As for Sunrise, Woodside remains locked in a dispute with the tiny nation of East Timor over where gas from the offshore Greater Sunrise field should be processed. Coleman met with East Timor President Xanana Gusmao on his visit to Australia last week.
Copyright (c) 2012 Dow Jones & Company, Inc.
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