BHP's exit a boost for Browse
BHP BILLITON'S decision to divest its stake in the $30 billion Browse joint venture has bolstered investor confidence that the controversial export gas project will finally go ahead.
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 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.
The 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 dealwas 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.
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