A new report from Wood Mackenzie (Wood Mac), highlights that the North West Shelf (NWS) liquified natural gas (LNG) project could have up to 7 million tonnes per annum (mtpa) of spare capacity available by 2027. This equates to 40 per cent of the project’s nominal capacity.
The Woodside-operated five-train NWS facility has been producing LNG since 1989. Next year, production capacity becomes available for the first time.
Wood Mackenzie senior analyst Daniel Toleman said decisions on how to fill this gap must be made now, not only because time is running out, but also because the joint venture is breaking up.
“Chevron is running a process to sell out of the NWS, and we see other majors likely to follow,” Mr Toleman noted.
“We see two windows of opportunity for backfill: one for smaller projects with short lead times, and the second for larger-scale resources that can extend the life of the NWS through to 2050.”
According to Wood Mac, good progress has been made on near-term backfill small-scale projects. They believe the Pluto and Waitsia projects will add incremental supply into the NWS from 2022. However, these projects would only be short-term solutions.
“In the longer term, large-scale developments are needed. The Scarborough and Browse developments, both operated by Woodside, are the most likely backfill options due to their size. Other possible candidates, such as Clio-Acme, or excess gas from Greater Gorgon field development, now look unlikely,” Wood Mac details.
However, neither the Scarborough nor Browse developments are straight-forward to deliver. The former is currently slated to supply a new second train at the Pluto plant, while the latter is a remote, complex, carbon-intensive and high-capex greenfield mega-project. As such, it faces a myriad of challenges in current market conditions.
Toleman said: “Challenges aside, there are compelling reasons for keeping NWS full. Once third-party gas flows through the plant, partners will receive a tariff for liquefaction. The government will receive additional tax revenue, the Dampier to Bunbury pipeline operator receives more revenue and there will be more domestic gas supply for the local market.”
“Upstream participants can also monetise undeveloped resources and gain access to potentially higher LNG prices on a low capital outlay.”
The NWS project participants are: Woodside (16.67 per cent interest), BHP Billiton Petroleum (North West Shelf) Pty Ltd (16.67 per cent), BP Developments Australia Pty Ltd (16.67 per cent), Chevron Australia Pty Ltd (16.67 per cent), Japan Australia LNG (MIMI) Pty Ltd (16.67 per cent) and Shell Australia Pty Ltd (16.67 per cent).
Wood Mac’s report ‘Australia’s North West Shelf LNG: the clock is ticking for backfill’ can be found here.
