Woodside Left Stranded After Shell Sells Sunrise Gas Stake

By Glenn Dyer | More Articles by Glenn Dyer

East Timor and Shell have handed Woodside a major headache in the deal by Shell to sell its stake in the huge Sunrise gas field.

East Timor and Shell announced that the country would pay $US300 million (A415 million) for the 26.6% stake in Sunrise held by the oil and gas major.

Sunrise straddles the maritime border between Australia and East Timor and disputes between the two countries over the border has delayed development for years.

This border issue between Australian and East Timor was settled earlier this year.

East Timor wants to develop Greater Sunrise by piping gas to a liquefied natural gas (LNG) plant on its south coast, while the project partners have favored a plant in Darwin in North Australia.

The Sunrise and Troubadour gas fields, collectively known as Greater Sunrise, hold around 5.1 trillion cubic feet of gas and about 226 million barrels of condensate, a light oil product.

Shell Australia chairwoman Zoe Yujnovich said the two parties had different views on how to develop the field. “We respect the Timor-Leste Government’s determination to develop the Sunrise fields through an onshore LNG facility on its south coast,” she said.

In September, East Timor bought ConocoPhillips 30% stake for $US350 million.

Both deals are subject to approval from East Timor’s Parliament and remaining partners Woodside (33.4%) and Osaka Gas (10%) not exercising their pre-emption rights.

The question now for Woodside, does it want to control Sunrise at a time when it is already in bad odour in East Timor.

Exercising its rights would see it emerge with well over 50% and a controlling stake in the field, but that, in turn, won’t make East Timor happy.

To exploit Sunrise, Woodside needs the support of the East Timor government.

The East Timorese government and Woodside have long had different ideas about how to exploit the huge Sunrise gas field.

Woodside, which has long resisted building an LNG plant in East Timor, as the government wants to do.

Woodside chief executive Peter Coleman may have suggested a possible compromise last month when he was reported saying Woodside would consider investing in the offshore production of gas from Sunrise but not the riskier pipeline or LNG plant.

Woodside could then sell gas to East Timor at the inlet to the pipeline.

East Timor is reportedly financing engineering work on a south coast LNG plant and pipeline to prepare for front-end engineering in 2020.

Woodside shares rose 0.6% to $31.85 yesterday.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →