BRISBANE, Australia - Woodside Petroleum Ltd. said it will restart efforts to find natural gas for an expansion of a flagship Australian export facility early next year, as it doused expectations it may look to fill a hole in its production growth with a big acquisition.
Woodside, Australia's biggest oil company by output behind BHP Billiton Ltd., has long led the nation's push to capture rising Asian demand for clean fuels, operating two of the country's three operating gas-export facilities and partnering companies like Royal Dutch Shell PLC on discovering new gas fields.
However, a lack of drilling success in recent years and rising costs means the Perth-based company is starting to lag rivals in developing new projects. Woodside put an expansion of its $15 billion Pluto gas-export facility in Western Australia state on ice last year after it failed to find enough gas nearby and talks with rival suppliers broke down.
Woodside will have two rigs drilling in waters near Pluto next year, targeting at least eight natural gas prospects, Chief Executive Peter Coleman said in an interview.
Woodside wants to expand Pluto because existing infrastructure makes it cheaper to bolt on extra liquefied natural gas, or LNG, processing units than starting new developments from scratch. The high cost of new LNG projects was cited by Woodside and partners for the recent decision to abandon plans to develop the Browse gas resource in Western Australia using an onshore plant.
Analysts say the setbacks mean Woodside will struggle to increase its annual production until 2018 at the earliest unless it uses surplus cash to buy rival companies or oil and gas fields already in development.
Mr. Coleman said the company retains the ability to make a "sizeable" acquisition following a recent US$500 million cash return to shareholders and a pledge to pay more of future profits as dividends.
But potential targets currently look expensive, he said.
"When you look at prices and so forth, it's not clear to me that it's a good time to be out in the market at all," Mr. Coleman said.
Mr. Coleman said Woodside would only be interested in acquiring willing sellers, and therefore isn't keen on making hostile takeover bids.
Copyright (c) 2012 Dow Jones & Company, Inc.
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