BHP signs off on LNG stake
The sale of BHP's stake to the Chinese petroleum giant was first mooted in December but doubts over the transaction emerged after the project's operator, Woodside, abandoned its original development plans in April amid soaring costs.
In a statement to the stock exchange on Friday, BHP said all required approvals had been secured and relevant documents were signed in Beijing to finalise the transaction.
"This sale reflects BHP Billiton's exit from the Browse joint ventures," it said.
In what can be seen as a vote of confidence in Woodside's new push for the project to be developed using cheaper floating technology, developed with joint venture partner Royal Dutch Shell, BHP and PetroChina signed off on terms originally agreed to in December.
It sees BHP's 8.33 per cent stake in the East Browse Joint Venture, and the 20 per cent interest in the West Browse Joint Venture change hands.
Woodside said in April it would not go ahead with the original plan to build a $45 billion-plus LNG project at James Price Point on the Kimberley coast.
Woodside has since moved a step closer to adopting an offshore option using two huge floating LNG ships, after entering an agreement with venture partner Shell to study the technology last month.
WA Premier Colin Barnett, speaking in Japan as part of a week-long trade mission, said WA remained on course to be a major energy supplier to the country, despite the delays to Browse and fears of mounting competition from the US and East Africa.
Despite the US shale gas revolution, the Premier said the Japanese appeared to have recognised that, while it could secure some gas exports from the Americans, most would be kept for domestic use.
Mr Barnett said Japan was going through "an agonising process" about its future energy sources after the Fukushima nuclear power plant disaster.
"Japan will also have to dramatically increase its gas imports to fill that gap over the next 10 years or so," he said.
Frequently Asked Questions about this Article…
BHP Billiton finalised the sale of its Browse liquefied natural gas (LNG) stakes to PetroChina. The deal transfers BHP's interests in the East and West Browse joint ventures and was signed off in Beijing after all required approvals were secured.
The sale was worth US$1.63 billion (about A$1.71 billion), according to the company statement announcing the finalisation of the transaction.
BHP sold its 8.33% stake in the East Browse Joint Venture and its 20% interest in the West Browse Joint Venture as part of the transaction with PetroChina.
Uncertainty arose after Woodside, the project's operator, abandoned its original onshore development plan in April because of soaring costs. That led to doubts the December sale terms might be abandoned, but the deal with PetroChina was ultimately completed.
Woodside decided not to proceed with the original plan to build a more than $45 billion onshore LNG project at James Price Point on the Kimberley coast, citing cost pressures. The company has since moved toward an offshore floating LNG option.
Woodside has progressed toward an offshore option using two large floating LNG (FLNG) ships. It entered an agreement with joint venture partner Royal Dutch Shell to study the floating technology as a cheaper alternative to the abandoned onshore plan.
For everyday investors, the deal signals BHP's exit from Browse joint ventures and reduces its exposure to the project's cost and development risks. PetroChina's purchase can be seen as support for the project moving forward under revised plans, and Woodside's shift to floating LNG may lower costs but still carries execution risk. Investors should view this as a structural change in project ownership and development approach rather than a near-term earnings forecast.
Western Australia faces competition from US and East African gas developments, but WA officials say the state remains on track to be a major energy supplier. Meanwhile, Japan — dealing with post-Fukushima energy choices — is expected to increase gas imports over the next decade, which supports demand prospects for LNG projects like Browse despite global competition.
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