BHP pullout boosts gas project
Coming less than four months after US petroleum giant Chevron sold its stake in Browse, BHP's exit means the joint venture's two main dissenting parties have departed, leaving their stakes with keener Asian entities.
BHP's stake will pass to PetroChina, assuming the $US1.63 billion sale is not challenged by regulators or bettered by existing joint venture partners, who have the right to match any bid.
Shares in Woodside Petroleum - the biggest shareholder and operator of the Browse project - rose by almost 2 per cent on the back of the news, and Bernstein Research analyst Neil Beveridge said the deal was a "clear positive" for Woodside.
"What this deal does is to effectively align the partnership around an LNG development," he said.
"With misaligned partners BHP and Chevron out of the project, and Chinese and Japanese buyers in, the partnership is now effectively aligned on the development of Australia's last major greenfield LNG development."
State and federal governments ordered the joint venture to evaluate just one site for the processing hub: the environmentally sensitive James Price Point near Broome. BHP and Chevron were believed to prefer the cheaper option of piping the gas south to the existing North-West Shelf processing hub, and controversy over the project's impact on local indigenous groups and the environment also tarnished its allure to the companies.
Those tensions bubbled over at the BHP annual meeting last month, when chief executive Marius Kloppers indicated he would have preferred to consider multiple locations. "As an industrial company, more options is always more valuable," he said.
Evaluation of the project is continuing and Woodside expects to make a final investment decision within the six months, assuming environmental approval from the federal government is forthcoming.
The joint venture now features PetroChina and Japanese duo Mitsubishi and Mitsui, alongside the existing partners, Shell, BP and Woodside.
WA Premier Colin Barnett said it was a good sign that organisations hungry for gas were buying into the project.
"This is what the government has been advocating for some time: that the buyers of gas, principally Japan and China, become investors in this project ... this is good news for the development of the Browse project and James Price Point," he said.
PetroChina already has exposure to Australian gas through Arrow Energy in Queensland, and Mr Beveridge said the investment in Browse could be seen as a "lack of confidence" in Arrow and other sources of gas.
For BHP, the decision continues its drive to divest non-core assets, particularly those in which the company is not the major stakeholder and operator.
BHP has divested more than $US4 billion of assets over the past year, and analysts at Goldman Sachs said the biggest positive out of the Browse deal was avoiding the upfront capital spend to build the project.
"We estimate the total project capex would have been in the vicinity of $US43 billion and as such BHP has reduced its future capex commitments by around $US4 billion."
BHP shares rose 1 per cent to $35.76, the stock's highest price since May 4.
Frequently Asked Questions about this Article…
BHP Billiton decided to divest its stake in the $30 billion Browse joint venture, agreeing to sell its interest for about US$1.63 billion. The move comes less than four months after Chevron sold its stake and is part of BHP's push to exit non-core assets.
PetroChina is expected to take BHP's stake for roughly US$1.63 billion, but the sale is conditional — it could be challenged by regulators or bettered by existing joint venture partners who have the right to match any bid.
Woodside Petroleum, the operator and biggest shareholder in Browse, saw its shares rise by almost 2% on the news. Analysts including Bernstein Research called the deal a "clear positive" because it helps align partners around an LNG development strategy.
Investors view the exit as positive because it removes two dissenting partners (BHP and Chevron), leaving partners more aligned — notably Chinese and Japanese buyers — around developing Browse as an LNG project. That alignment improves the project's prospects for moving forward.
The joint venture was ordered to evaluate a single processing hub site: the environmentally sensitive James Price Point near Broome. Controversy over the project's impact on local Indigenous groups and the environment has been a key factor affecting company support for the project.
Woodside expects to make a final investment decision within six months, provided the federal government grants the necessary environmental approval.
The sale aligns with BHP's strategy to divest non-core assets, especially where it is not the operator. BHP has sold more than US$4 billion of assets in the past year. Analysts at Goldman Sachs noted the bigger benefit is avoiding the upfront capital spend: total project capex was estimated around US$43 billion, and BHP has reduced its future capex commitments by about US$4 billion.
Following BHP's exit, the joint venture features PetroChina and Japanese partners Mitsubishi and Mitsui, alongside the existing partners Shell, BP and Woodside. Western Australian Premier Colin Barnett described participation by gas buyers as a positive sign for the project's development.
Call 1300 880 160
Start a chat
Schedule a call
