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Bloomberg: Woodside Signs Deal to Sell LNG to Taiwan’s CPC Corp. (Update3)

By Angela Macdonald-Smith and Yu-huay Sun

Nov. 19 (Bloomberg) — Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, signed an accord to sell as much as 3 million tons a year of liquefied natural gas to CPC Corp., a deal that may be worth up to A$45 billion ($40 billion).

The LNG will be supplied over 15-20 years from the proposed Browse project off Australia’s northwest coast, with deliveries starting in 2013-2015, Perth-based Woodside said today in a statement to the Australian Stock Exchange. The agreement is preliminary and sets out key terms, including price, it said.

LNG demand in Taiwan, Asia’s third-biggest buyer of the fuel, is forecast to rise 31 percent to 10.5 million tons in 2010, and to double by the end of the next decade. Woodside signed a similar initial accord in September to sell the same volume of LNG to PetroChina Co., which it said then may yield revenue of between A$35 billion and A$45 billion, if confirmed.

“Everyone wants gas, that’s not open to question,” said Aiden Bradley, an oil and gas analyst at ABN Amro Australia Ltd. in Sydney. “We don’t believe terms of agreement contracts with the Chinese or Taiwanese in any way improves the chances of Browse being developed” given the venture partners still need to agree how to develop the field, he said.

Woodside, the operator and 47 percent owner of the undeveloped Browse project, gained A$1.63, or 3.5 percent, to A$48.50 in Sydney trading, snapping three days of declines. The gains beat a 1.6 percent increase in the exchange’s benchmark energy index.

`Stable, Diversified’

Woodside, 34 percent owned by Royal Dutch Shell Plc, said in September it had held talks with CPC on LNG sales, after Bloomberg reported the Taiwanese company planned to buy as much as 3 million tons a year of fuel from the Browse project.

“The deal is excellent in helping make our natural gas supplies more stable and diversified,” Wang Yunn-ming, deputy director-general at the Bureau of Energy in Taipei, said by telephone today. “Natural gas is clean and good for the environment and we’re sticking to our goal in boosting demand for the fuel. The CPC deal is helping on this front.”

About 80 percent of natural gas in Taiwan is used in power generation, so stable supply sources are important for electricity supplies, Wang said.

The initial agreement allows Woodside and CPC to negotiate in “good faith” toward an LNG sales contract based on the agreed terms, Woodside said in the statement. The contract is subject to the venture partners agreeing to build the project and getting government planning approvals, it said.

Rival Projects

The Browse project may have a capacity of as much as 15 million tons a year in two or three production units, Kirsten Stoney, a spokeswoman for Woodside, said today. Woodside said last week it’s considering five development options for the Browse project.

BHP Billiton Ltd., BP Plc, Chevron Corp. and Shell own stakes in the Browse venture. Most of the partners have rival LNG ventures in the region that they want to develop first, which may delay the sanctioning of the project beyond Woodside’s schedule, ABN’s Bradley said.

ABN expects the project may cost $20 billion and may start deliveries in 2016-2018, as much as five years later than Woodside’s schedule, Bradley said.

The agreement is Woodside’s first long-term supply agreement with Taiwan, the largest LNG market in the Asia- Pacific region behind Japan and South Korea. While the accord is solely between Woodside and CPC, it’s possible the contract, if confirmed, could be spread between all the Browse partners, Stoney said.

Potential Sales

The accord “also facilitates discussions between Woodside and CPC in relation to the potential sale of liquefied natural gas from Woodside’s other proposed liquefied natural gas developments,” Woodside said in the statement.

The Browse project is competing against rival LNG ventures in the Australian region such as Exxon Mobil Corp.’s proposed Papua New Guinea venture, Chevron’s Gorgon project and Inpex Holdings Inc.’s Ichthys project, both in Western Australia. BHP Billiton and Santos Ltd. are also proposing LNG projects in Australia.

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: November 19, 2007 02:41 EST

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