Rising costs, labour shortage imperil Woodside's Browse plan
Some analysts believe the controversial proposal to build a gas plant at James Price Point near Broome is not economically viable due to spiralling costs and challenges in securing labour.
They expect Woodside's final investment decision on Browse to be delayed by at least another year, meaning state government approval for the project will lapse.
But Woodside is sticking to its schedule for a final decision by June. "The final investment decision target for Browse for mid this year has not changed," a Woodside spokeswoman said on Tuesday.
The company declined to comment on whether the Coalition's state election victory or a swing to the Greens in the Kimberley would have any impact on its plans.
"We're still not making any comment with regards to the election at this time," the spokeswoman said. A four-way race in the Kimberley is tipped to run until Saturday.
After the election, Mr Barnett reiterated his stance on the project, saying it would provide great economic and social benefits.
Meanwhile, federal Special Minister of State Gary Gray weighed into the Browse debate on Tuesday, backing Woodside's joint venture partner Royal Dutch Shell's preference for a floating liquefied natural gas operation, rather than an onshore processing plant.
He said the use of floating technology was an opportunity for WA to broaden its expertise in cutting-edge technology.
Commonwealth Bank analysts expect a final investment decision on Browse to be delayed for at least 18 months.
"Market speculation regarding the ultimate choice between development concepts of a project at James Price Point versus a tieback to the North West Shelf is likely to continue until a targeted final investment decision in the first half of 2013," CBA analysts said in a note to clients.
CBA said Browse was the key driver in terms of shareholder value for Woodside over the next 12 to 18 months. Woodside has so far spent about $1 billion on Browse.
Last week BP refused to reveal whether it wanted the Browse gas project built onshore or offshore. BP is also a joint-venture partner in the project with BHP Billiton, Shell, Mitsubishi and Mitsui.
In addition, industry sources tip former WA environment minister Bill Marmion to be the next WA mines and petroleum minister.
Frequently Asked Questions about this Article…
The Woodside Browse gas project is a proposed A$40 billion development to process gas from the Browse fields, with a controversial onshore plant planned for James Price Point near Broome. Woodside has already spent about A$1 billion on Browse and Commonwealth Bank analysts say the project is a key driver of Woodside shareholder value over the next 12–18 months, so its outcome matters to investors watching Woodside's growth prospects and value.
Analysts in the article say spiralling construction and operating costs, together with difficulties in securing enough labour for a remote onshore build at James Price Point, have made the project look less economically viable and increased the likelihood of delays or re‑scoping.
Woodside has publicly reiterated a target for a final investment decision by mid‑year (by June). However, Commonwealth Bank analysts and other market commentators expect the FID to be delayed by at least 12–18 months, so investors should be aware of competing timelines.
The main options discussed are a traditional onshore processing plant at James Price Point, a tieback to the existing North West Shelf infrastructure, or floating liquefied natural gas (FLNG) technology. Royal Dutch Shell, a joint‑venture partner, prefers a floating LNG solution and federal minister Gary Gray publicly supported that option in the article.
According to the article, the Browse joint venture includes Woodside and partners BP, BHP Billiton, Royal Dutch Shell, Mitsubishi and Mitsui. BP declined to state a public preference between onshore or offshore development in the article.
Analysts expect that delaying the FID by at least another year could cause the existing state government approval for the James Price Point option to lapse. That would complicate onshore development plans and could force Woodside and partners to revisit project scope or timing.
The article notes strong political involvement: West Australian Premier Colin Barnett is a vocal supporter citing economic and social benefits; federal Special Minister of State Gary Gray backed Shell’s preference for floating LNG; and industry sources suggest Bill Marmion could become the next WA mines and petroleum minister — all factors investors should follow, since political support can influence approvals and project timing.
Investors should monitor Woodside announcements on the FID timetable (Woodside’s mid‑year target vs analyst expectations of delay), updates from joint‑venture partners (Shell, BP, BHP Billiton, Mitsubishi, Mitsui), Commonwealth Bank or other analyst notes on shareholder value, any changes to state approvals, and news on project costs and labour availability — all of which can materially affect project viability and Woodside’s stock outlook.
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