Woodside Strikes Gas for Pluto LNG Expansion

SYDNEY (Dow Jones Newswires), Aug. 16, 2010

Woodside Petroleum said Monday that it has found more gas offshore Western Australia state, potentially putting an expansion of its A$13 billion Pluto liquefied natural gas project back on track.

The discovery, however, is further out to sea than other fields supporting the project, so the gas will be harder to get to shore.

An end-of-year final investment decision target for the onshore LNG processing plant's expansion to two production units was notably absent from Woodside's second quarter production report last month following a few disappointing exploration results.

Woodside said at the time it expected to update the market on the expansion's timing at the release of its first half results, due Wednesday, by which time it may have completed the Alaric-1 and Larsen Deeps-1 exploration wells.

The new discovery announced Monday, at Alaric-1, appears substantial.

Woodside said the well, of which it owns 100%, intersected a 185 meter gas column and that it's still deepening the search to penetrate the full column, suggesting it could larger.

A glance at a recent Woodside slideshow presentation shows that Alaric-1 is more than 500 kilometers out to sea, while the original Pluto discovery is only about 180 kilometers offshore. Woodside intends to transport the gas it finds to the LNG processing plant through undersea pipelines. Any pipeline from Alaric would probably travel to the Pluto offshore platform before joining an existing pipeline from that platform to land.

E.L.&C.Baillieu Stockbroking director Ivor Ries said Alaric's longer distance from the coast shouldn't be a major issue for Woodside, noting that gas travels as far as 700 kilometers to some other LNG plants around the world.

In round numbers, Ries said every 100 kilometers of pipeline adds about 10 Australian cents per gigajoule to the cost of the gas, adding that LNG generally sells for around A$10-A$12 per gigajoule.

The Larsen Deep-1 well, being drilled in a joint venture with Hess Corp, is closer to the coast, and investors will be looking for an update on that well's progress on Wednesday.

"Larsen Deep is particularly important--if it fails, the market might start to get really concerned," an analyst from a large global investment bank said last month.

The foundation stage of Pluto is on track to ship first gas by March and a doubling of its size would substantially boost Woodside's revenues.

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