This Oil Company Invests On Biggest Growth Project

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  • Australia’s biggest independent oil and gas firm said it had agreed to sell a 49% stake in a planned second processing unit, or ‘train’, at the Pluto LNG plant to private equity firm Global Infrastructure Partners (GIP).
  • The deal also includes provisions for GIP to be compensated for emissions liabilities against an undisclosed baseline.
  • GIP will earn revenue from an undisclosed toll that the Pluto LNG plant will charge to process Scarborough gas.
  • Credit Suisse said that while Woodside had achieved a key milestone, the company was taking on a degree of construction risk for up to a 30% cost blowout on the project.

Woodside Petroleum (WPL.AX) announced the sale of a 49% stake in the planned expansion of its Pluto liquefied natural gas (LNG) plant in Western Australia on Monday, taking a key step toward funding its greatest growth project as reported by Reuters.

Pluto LNG plant

Australia’s largest independent oil and gas company said in a statement that it has agreed to sell a 49% ownership in the Pluto LNG plant’s planned second processing unit, or train,’ to private equity firm Global Infrastructure Partners (GIP).

Woodside has been attempting to sell the interest for nearly two years in order to make a final investment decision on the $12 billion Scarborough gas project and Pluto LNG expansion, which will super-chill gas from the Scarborough field for export, by Dec. 15.

GIP will pay its 49% part of the $5.6 billion construction cost of Pluto Train 2, plus an additional $835 million, per the terms of the agreement. If project expenses exceed budget or the project is delayed, the $835 million may be decreased, but if costs are within budget, GIP will reward Woodside.

“As we get closer to a final investment decision on our Scarborough development, the sale of our equity in Pluto Train 2 is an important milestone,” Woodside CEO Meg O’Neill said in a statement.

GIP will also be compensated for emissions liabilities against an unknown baseline under the terms of the agreement. The Pluto LNG project will charge an unknown toll to process Scarborough gas, which will generate money for GIP.

Following the announcement, Woodside’s stock surged as much as 1.8%, while its peers were flat to down.

While Woodside had completed a crucial milestone, Credit Suisse stated that the business was taking on a construction risk of up to a 30% cost overrun on the project.

In a note, Credit Suisse analyst Saul Kavonic wrote, “This is despite management saying in the past that (Woodside) would share full risk with any new partner.”

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Source: Reuters

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