Final investment decisions have been made on the Scarborough and Pluto Train 2 developments, including new domestic gas facilities and modifications to Pluto Train 1 off WA’s North West.
The $16 billion liquefied natural gas development will see gas from the Scarborough resource processed at Woodside’s Pluto LNG facility on the Burrup Peninsula, near Karratha.
As part of the development, a second LNG train and a new domestic gas facility at the Pluto site will be constructed.
Construction is scheduled to commence in 2022 with first LNG cargo targeted for 2026. It is expected to create 3,200 job, and once operational the project will support around 600 jobs.
The Scarborough project will support the production of eight million tonnes per annum of LNG through Pluto Trains 1 and 2, and a domestic gas commitment of around 180 terajoules per day.
Consistent with the WA Domestic Gas Policy, the Scarborough Joint Venture will make gas equivalent to 15 per cent of its LNG exports available to the domestic market. Around 1,400 petajoules of gas is expected to be supplied to the WA market over the life of the Scarborough project.
Chamber of Minerals and Energy of WA Chief Executive Paul Everingham said the announcement represents the largest investment in a resources project within Australia in a decade.
“The Scarborough and Pluto Train 2 developments will provide significant employment for West Australians and generate strong opportunities for local companies and suppliers,” Mr Everingham said.
“It’s been estimated Scarborough and Pluto Train 2 will contribute $19 billion to the Australian economy through taxation and boost national gross domestic product by $125 billion to 2063.”
Scarborough will be connected by a pipeline of around 430km to a second LNG train at the existing Pluto LNG onshore facility near Karratha.
The project has received a lot of criticism from some organisations, saying it could release as much carbon as 15 coal power stations running for 30 years.
However, Woodside states Scarborough gas processed through Pluto Train 2 will be one of the lowest carbon intensity sources of LNG delivered to customers in north Asia.
Woodside CEO Meg O’Neill said the Scarborough reservoir contains only around 0.1 per cent carbon dioxide.
“Scarborough gas processed through the efficient and expanded Pluto LNG facility supports the decarbonisation goals of our customers in Asia.”
Approximately 60 per cent of Scarborough capacity is contracted, including domestic gas for the proposed Perdaman urea project.
Wood Mackenzie senior analyst Daniel Toleman said Scarborough is the last remaining giant undeveloped resource outside of Browse, but its sanction raises big questions for the North West Shelf (NWS) JV.
“With Scarborough confirmed to Pluto, the forward plan for the NWS now needs urgent clarification. The once-mighty NWS is maturing and needs new resource to keep its five trains full. Third-party agreements have been struck with Waitsia and Pluto. But these only provide a stopgap as we see spare capacity increasing to more than 8 mmtpa by 2030. A sizeable backfill development is needed to change this course.”
The FID also comes at an interesting time in the global LNG market. Spot prices are at record highs and prices are expected to remain strong through to 2026, when Scarborough is expected online. Cashflow from these high prices will help Woodside fund the development. But there is a risk that the project will start up as the next supply glut – led by Qatar – begins in the mid-2020s.
Toleman said: “Woodside is not the only LNG player looking to take advantage of rising prices and strong demand. Over the next 12 months we expect several low-cost projects to move towards sanction. These include Cheniere’s Corpus Christi Stage 3 and Venture Global’s Plaquemines project in the US, North Field South in Qatar and Arctic LNG-1 in Russia.
“Nonetheless, for Woodside, Scarbrough plus Pluto Train 2 is a company-making project. It will bring over 20 years of strong cashflow, and locks in production growth through to 2030 and beyond. The next question is around participation. Having recently brought a partner into Pluto Train 2, does it intend to do the same with Scarborough?”
Minister for Resources and Water Keith Pitt said the project comprises a $5.7 billion development of the offshore gas field and associated pipeline infrastructure and $6.3 billion onshore for the new LNG train at Pluto.
“Over the life of the project, which should extend into the 2050s, it will provide a boost in Australia’s GDP by A$125 billion and generate A$33 billion in direct and indirect taxation for federal and state Governments.”
“Woodside says that Scarborough gas will provide enough energy to power the homes in 10 cities like Perth for more than 30 years” Minister Pitt said.
“This LNG will go into markets across our Asian neighbourhood, contributing to lifting millions out of energy poverty and providing jobs and opportunity for Australians and our trading partners.”
