Rising costs, labour shortage imperil Woodside's Browse plan
Woodside Petroleum's $40 billion Browse gas project looks less likely to go ahead, despite the re-election of its biggest supporter, West Australian Premier Colin Barnett.
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.