Woodside offloads partial stake in Australian gas field while pursuing emerging energy sectors

Australia’s energy giant Woodside has entered into a sale and purchase agreement with LJ Scarborough – a subsidiary of LNG Japan, which is a 50:50 joint venture between Sumitomo Corporation and Sojitz Corporation – for the sale of a 10 per cent non-operating interest in the Scarborough Joint Venture, comprising the Scarborough gas field and associated offshore and subsea infrastructure. The players will also explore opportunities in new energies.

Scarborough FPU; Source: Woodside

The purchase price for the 10 per cent stake is $500 million, subject to adjustments and LNG Japan will reimburse Woodside for its share of expenditure for the Scarborough project from the transaction effective date of 1 January 2022. Upon completion, expected in the first quarter of 2024, the estimated total consideration comprising the purchase price, reimbursed expenditure, and escalation is approximately $880 million.

The completion of this sale is subject to conditions precedent including Foreign Investment Review Board approval, National Offshore Petroleum Titles Administrator approvals, and Western Australian government approvals.

Following completion, Woodside will hold a 90 per cent interest in the Scarborough Joint Venture and remain as operator. The gas from the Scarborough field will be processed at the Pluto LNG facility, where the company is currently constructing Pluto Train 2. Woodside is also the operator of the Pluto Train 2 Joint Venture and holds a 51 per cent participating interest.

Located approximately 375 km off the coast of Western Australia, the Scarborough field’s development will include the installation of a floating production unit with eight wells drilled in the initial phase and thirteen wells drilled over the life of the field.

The reservoir contains less than 0.1 per cent carbon dioxide and the gas will be transported for processing at Pluto LNG through a new trunkline of approximately 430 km in length. The final investment decision was made in November 2021 and the first LNG cargo is targeted for 2026

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According to Woodside, its strategic relationship with LNG Japan involves three elements: equity in the Scarborough Joint Venture, potential LNG offtake, and collaboration on opportunities in new energy. In line with this, the Australian energy giant and LNG Japan Corporation entered into a non-binding heads of agreement for the sale and purchase of 12 LNG cargoes per year – approximately 0.9 million tonnes per annum – for ten years starting in 2026.

Kyo Onojima, LNG Japan CEO, remarked: “We are very pleased to join the Scarborough Joint Venture and are looking forward to finalising the LNG offtake agreement and exploring business opportunities in the new energy sector.”

Moreover, Woodside also entered into non-binding agreements to collaborate with Sumitomo Corporation and Sojitz Corporation on global opportunities in new energy which could entail ammonia, hydrogen, carbon capture and storage (CCS), and carbon management technology.

Meg O’Neill, Woodside CEO, commented: “The support of LNG Japan is testament to the quality of the Scarborough project. It also underscores the ongoing demand from Japanese buyers for new supplies of gas and the role of gas in supporting Japan’s energy security.

Our new energy agreements with Sumitomo and Sojitz provide further opportunities for us to work closely together on our shared decarbonisation and energy security ambitions.

“Scarborough will be an important source of gas for both the Western Australian and international markets, supporting domestic jobs and providing taxation revenue for the state and federal governments. We look forward to working with LNG Japan to deliver this world-class project.”