In preparation for a targeted final investment decision (FID) later this year, Woodside has finalised technical work to support execution readiness and completed an update of the capital expenditure requirements for the Scarborough development.
The Scarborough gas resource forms a part of the Greater Scarborough offshore gas fields which are estimated to hold 13 Tcf (2C, 100 per cent) of dry gas. The Greater Scarborough gas fields include Thebe, Jupiter and Scarborough.
Woodside, as operator of the Scarborough Joint Venture, is proposing to develop the Scarborough gas resource through new offshore facilities connected by an approximately 430-kilometre pipeline to a proposed second LNG train (Pluto Train 2) at the existing Pluto LNG onshore facility.
The company was initially proposing to develop the Scarborough gas field with between seven and nine high-rate gas wells, tied back to a semi-submersible floating production unit (FPU) moored in 950 metres of water close to the Scarborough field.
Scarborough project update
Today Woodside advised that refreshed pricing from major contractors underpins the updated cost estimate and reflects Woodside’s work with these contractors to maximise the value of the project by optimising design and execution planning and increasing offshore processing capacity.
The updated cost estimate is US$12 billion (AU$16 billion), comprising US$5.7 billion (AU$7.6 billion) for the offshore component and US$6.3 billion (AU$8.5 million) for the onshore component.
The cost estimate is approximately 5 per cent higher than the previous cost estimate announced in November 2019 and incorporates:
- An approximately 3 per cent cost increase in the onshore component, including modifications to Pluto Train 1 to enable processing of Scarborough gas; and
- An approximately 8 per cent increase in the offshore component, including an increase in offshore production capacity from 6.5 Mtpa to 8.0 Mtpa of LNG and an additional well.
The expected internal rate of return (IRR) of the integrated Scarborough and Pluto Train 2 development is greater than 12 per cent.
Woodside states that it has a globally competitive cost of supply of approximately $6.8/MMBtu to north Asia and is targeted to deliver the first cargo in 2026 into a market with anticipated robust demand for LNG [1].
Woodside Acting CEO, Meg O’Neill, reaffirmed that the Scarborough development is a transformational project that will deliver enduring shareholder value.
“Significant progress has been made towards our targeted FID on Scarborough and Pluto Train 2 this year,” she said.
“The cost update includes value-accretive scope changes to deliver an approximately 20 per cent increase in offshore processing capacity and to modify Pluto Train 1 to allow increased Scarborough gas processing. It also reflects the work undertaken with our contractors to optimise the execution schedule and manage costs in preparation for FID.”
“Woodside’s contracting strategy for Scarborough reduces cost risk, with approximately 90 per cent of total project contractor spend structured as lump-sum and fixed-rate agreements.”
“We have commenced the formal processes for selling down our interest in Pluto Train 2 and Scarborough as we target the investment decision later this year and these processes are supported by the updated cost estimate,” Ms O’Neill said. More information on Scarborough can be found here.
[1] Cost of supply based on integrated LNG DES North Asia. At 10 per cent discount rate.
