Woodside strengthens ties with JERA through sale of partial stake in gas field, LNG offtake, and pursuit of new energies

Australian energy giant Woodside is in the process of widening the scope of its relationship with JERA, an equal joint venture of two major Japanese electric power companies, TEPCO Fuel & Power Incorporated and Chubu Electric Power Company. This will be accomplished through the sale of a partial interest in the Scarborough Joint Venture (JV), LNG offtake deal, and collaboration on opportunities in new energy and lower carbon services.

Scarborough FPU; Source: Woodside

To this end, the Australian player has executed a binding sale and purchase agreement with JERA for the sale of a 15.1% non-operating participating interest in the Scarborough JV, covering the Scarborough gas field and associated offshore and subsea infrastructure, for an estimated total consideration of $1.4 billion. This entails the purchase price of around $740 million and reimbursement to Woodside for JERA’s share of expenditure incurred from the effective date of January 1, 2022.

The completion of the Scarborough equity transaction, which is expected in 2H 2024, is subject to conditions precedent, including Foreign Investment Review Board approval, National Offshore Petroleum Titles Administrator approvals, Western Australian Government approvals, and satisfaction of requisite financing approvals.

Meg O’Neill, Woodside’s CEO, commented: “Woodside welcomes Japan’s largest utility, JERA, into the Scarborough Joint Venture. This builds on a long history of collaboration, starting in 1989 with LNG sales from the North West Shelf to JERA’s parent companies Tokyo Electric and Chubu Electric.

“JERA’s participation in the Scarborough Joint Venture, which will also include LNG Japan, is a further demonstration of the importance of the project to Japanese customers and confidence in long-term demand. Scarborough is a world-class project which will provide reliable energy for our customers in the Asian region, including in Japan.”

The Scarborough transaction comes with an option for JERA to acquire a 15.1% non-operating participating interest in the Thebe and Jupiter fields as well as a non-binding agreement that outlines a long-term collaboration to pursue opportunities for additional feed gas and joint investment in offshore gas fields for future tie-back to the Pluto LNG facility via Scarborough infrastructure.

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“LNG continues to be an important energy source for Japan and one which supports the country’s decarbonisation ambitions. In Australia, the Scarborough Energy Project will provide local jobs and contracting opportunities and deliver tax revenue to state and federal governments,” added O’Neill.

Furthermore, Woodside and JERA have also entered into a non-binding heads of agreement for the sale and purchase of six LNG cargoes on a delivered ex-ship basis per year for ten years, starting in 2026 from the Australian giant’s global portfolio.

“We are also looking forward to exploring new energy and business opportunities alongside JERA. These have the potential to further our shared ambitions to develop new energy value chains between Australia and Japan,” underlined O’Neill.

In addition, a non-binding agreement for new energy collaboration, including potential opportunities in ammonia, hydrogen, carbon management technology, and carbon capture and storage (CCS), was also signed by the duo to support common decarbonization ambitions.

Aside from this, a non-binding agreement has been inked for Woodside to provide carbon management services to assist JERA in meeting its obligations associated with its share of carbon emissions from the Scarborough Joint Venture. Following completion of the sale of equity to JERA, Woodside will hold a 74.9% interest in the Scarborough Joint Venture and remain as operator.

Yukio Kani, JERA’s Global CEO and Chair, remarked: “Solving the world’s energy issues requires deep collaboration to tackle challenges one by one with reliable partners. I am grateful for the open and engaging dialogue I have had with Woodside CEO Meg O’Neill. I look forward to further developing our relationship with Woodside, a global player in LNG, and to promote new initiatives to achieve decarbonisation.”

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 gas from the Scarborough field will be processed at the Pluto LNG facility, where the company is currently constructing Pluto Train 2

Recently, the first three modules of a total of 51 that are required for the Scarborough project’s Pluto Train 2 arrived in Karratha. Once all modules come, they will form Pluto Train 2, which will be the second LNG production train at the existing Pluto LNG onshore facility. The first LNG cargo is slated for 2026.

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Woodside is the Pluto Train 2 joint venture operator and holds a 51% participating interest. The reservoir contains less than 0.1% carbon dioxide and the gas will be transported for processing at Pluto LNG through a new trunkline of approximately 430 km.