Woodside, Shell strike deal for floating LNG option

Woodside Petroleum has announced an agreement with Shell that indicates floating liquefied natural gas is Woodside's preferred option to develop its massive Browse gas resource.

The agreement will enable Browse to undertake floating LNG (FLNG) as a development option using Shell's technology.

But any decision still requires the approval of the other Browse joint venture partners.

"Woodside will immediately engage with the joint venture participants regarding the agreement, the extent of work on alternative development concepts and the obligations under the Browse retention leases," Woodside said in a statement to the stock exchange on Tuesday.

Woodside's decision earlier this month to drop its original $45 billion-plus onshore development plans for the Browse project due to rising costs was widely welcomed, but also prompted analysts to question where the oil and gas giant's future growth was going to come from.

Woodside considered other development options, including a smaller onshore plant at James Price Point and a pipeline option with North West Shelf and Pluto.

But comments from Woodside chief executive Peter Coleman on Tuesday appeared to confirm FLNG was the leading option. He said FLNG had the potential to commercialise the Browse resources in the earliest possible time frame.

"This agreement enables Woodside, as operator of the Browse LNG Development, to strengthen our development and operational capabilities through the potential use of Shell's ... FLNG technology," Mr Coleman said.

"It also provides the opportunity for Western Australia to become an industrial, operational and technology centre for excellence for floating LNG worldwide."

The other Browse joint venture partners include BP, Japan Australia LNG and BHP Billiton.

Shares in Woodside closed 99¢, or 2.6 per cent, lower at $37.56 on Tuesday.