Bloomberg: Woodside Confirms LNG Talks With CPC, Asian Buyers (Update3)

By Angela Macdonald-Smith and Yu-huay Sun

Sept. 11 (Bloomberg) — Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, said it has held talks with Taiwan’s CPC Corp. and other Asian buyers for liquefied natural gas sales and initial accords may be signed “soon.”

The potential contracts are for the sale of “significant volumes” of LNG, Perth-based Woodside said in a statement today to the Australian Stock Exchange. The statement came after Bloomberg reported yesterday CPC plans to buy as much as 3 million metric tons a year of LNG from the Browse project.

Taiwan’s LNG demand is forecast to rise 31 percent to 10.5 million metric tons in 2010, and to double by the end of the next decade. The island uses LNG for more than 90 percent of its gas and is Asia’s third-largest buyer. CPC’s agreement with Woodside may be valued at as much as $37 billion, based on a similar accord Woodside reached last week with PetroChina Co., the first customer to sign up for Browse LNG.

“Woodside said in August it was talking to buyers, so beyond PetroChina it was a question of which other one it was, or other ones,” said Stuart Baker, a Melbourne-based oil and gas analyst at Morgan Stanley in Melbourne. “They don’t have enough to underpin the project, so this is a step in that direction.”

Woodside, which owns 47 percent of the undeveloped Browse project, rose 24 cents, or 0.5 percent, to A$46.00 on the exchange, lagging a 0.7 percent gain in the exchange’s benchmark energy index.

Key Terms

The project may have a capacity of 14 million tons a year, Woodside said last year, representing about 8 percent of Asia’s expected 2015 LNG demand of 180 million tons as forecast by Woodside’s 34 percent shareholder Royal Dutch Shell Plc.

An initial accord with CPC would be a so-called key terms agreement, which would include an agreement on the LNG price and be subject to “a number” of conditions, Woodside said in the statement. Any agreements would be disclosed once complete, it said, without identifying the other potential Asian customers.

Woodside won’t confirm the CPC talks related to LNG from the Browse venture, said Roger Martin, a spokesman in Perth. Woodside is also operator of the North West Shelf LNG venture and is developing the Pluto LNG project. Its undeveloped LNG ventures include Browse and Sunrise in the Timor Sea.

BP Plc, BHP Billiton Ltd., Chevron Corp. and Shell own stakes in Browse.

PetroChina Accord

CPC may sign an agreement this year to buy LNG from Browse, with supplies starting as early as 2013, an official at the Taiwanese oil refiner said, declining to be identified because of a confidentiality agreement with Woodside.

PetroChina, Asia’s largest oil company by market value, Sept. 6 agreed to buy 2 million to 3 million metric tons a year of LNG over 15 to 20 years starting in 2013 to 2015 from Browse. Woodside Chief Financial Officer Mark Chatterji estimated the value of the accord at between A$35 billion ($29 billion) and A$45 billion.

The Browse project is competing against rival LNG ventures in Australia such as Chevron Corp.’s Gorgon project and Inpex Holdings Inc.’s Ichthys project. The timing of the start-up of deliveries may slip beyond Woodside’s 2013-2015 timeframe, said Mark Greenwood, Sydney-based oil and gas analyst at JPMorgan Chase & Co. BHP Billiton and Santos Ltd. are also proposing LNG projects in Australia, while Exxon Mobil Corp. is studying a plant in Papua New Guinea.

“Many of these projects are planning first LNG production by 2015,” Greenwood said in a Sept. 6 report. “Not all of these projects will proceed by 2015, as there will not be the resources to complete all of this work, nor the market demand. It will be the most viable projects which proceed first.”

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it is turned back into gas for distribution to power plants, factories and households.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected] ; Yu-huay Sun in Taipei at [email protected]

Last Updated: September 11, 2007 03:31 EDT

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