Woodside Petroleum seems to be continuing its LNG rationalisation phase and concentrating more on Australia, West Africa and Canada.
After quitting an LNG project on the Canadian West Coast earlier this year (the Grassy Point project, and focused on a second project with Chevron at Kitimat) and then building its stake in the Scarborough gas project off the Pilbara coast of WA, the company is now questioning its future involvement in a big LNG project in the US.
Woodside CEO, Peter Coleman told a US energy industry conference this week that the company will soon decide if it will continue to invest in Sempra Energy’s $US9 billion Port Arthur liquefied natural gas export project in Texas.
According to a report from Reuters, Mr Coleman told the World Gas Conference in Washington DC, that the project’s ability to provide Woodside with an adequate return is “very challenged”.
“We’ve got to make some decisions pretty soon about our continued pursuit (of Port Arthur) with Sempra,” he said while noting that Woodside has been paying part of the cost to develop the project.
“We don’t have an investment in (Port Arthur): what we’ve been doing is just paying our way, and whether that is going to give us an adequate return, I would say today that is very challenged," Reuters reported.
Sempra and Woodside agreed in early 2016 to share development of Port Arthur that could result in Woodside buying half the project once the parties made a final investment decision to build the facility
Sempra announced on Tuesday that Polish Oil & Gas Co agreed to buy LNG from Port Arthur, were not immediately available for comment.
The Port Arthur LNG project includes two liquefaction trains capable of producing up to 13.5 million tonnes per annum of LNG, up to three storage tanks and shipping facilities.
More details might come tomorrow night after Sempra holds its annual analysts briefing day. The company remains under pressure with two hedge fund activist groups agitating for the company to review its projects and operational structure.
These activists want six new shareholders and for Sempra to sell off its Latin American operations and spin off its LNG business. Sempra also has a new CEO who has to deal with the activists and a warning from ratings groups that its rising leverage could threaten its ratings.
More Coleman’s comments could also be seen as pressure to either get a deal from Sempra to exit the business or a signal the investors that the Port Arthur project is problematic.
Woodside shares were up 1.4% to $35.05 after US oil prices reclaimed the $US70 a barrel level on Tuesday.