“Pluto, we think, is a gatherer of gas in the Carnarvon Basin,” he said, describing a model in which stranded gas reserves could be collected and processed by Woodside for export.
“We see certain hubs developing up and down the coast of Western Australia,” Voelte said.
“Browse will have the same concept.”
With a 100 million tonne shortfall in annual LNG supplies forecast by 2015, Australia’s largest publicly traded petroleum exploration and production company is putting this project on the fast-track to meet what Voelte described as “extreme demand” for gas.
Earlier this year, Voelte told shareholders that Pluto could become one “of the world’s fastest LNG projects from discovery to production if we continue at this pace”.
Full control of the project was allowing Woodside to aggressively drive its development, according to Voelte.
“It is really hard to explain what it means not having partners,” he said.
“We control it. And it is amazing to me what that does on a development.”
Woodside’s plans call for a 5-6 million tonne per annum (MMtpa) LNG plant.
The Perth-based company’s development concept involves an offshore subsea gathering system, which would potentially be tied back to an offshore platform. Gas would then be piped 190km to shore for further processing.
Land constraints will require developing two separate sites on the Burrup Peninsula, one for gas processing and another for LNG storage and export.
Woodside is seeking separate WA government approvals for “Site A”, which will house the two LNG tanks, each with a storage volume of up to 160,000 cubic metres.
Preparation activities on Site A must start by the end of September to ensure the storage facilities – which require a longer construction lead time than the LNG plant – are ready to be commissioned along with the plant in 2010.
The main Pluto development assessment report is due to be released for eight weeks of public comment in the second half of 2006. Given that Woodside proposes to build the onshore facilities close to existing infrastructure (North West Shelf LNG and Burrup Fertilisers), analysts do not expect Pluto to face major environmental or planning hurdles.
“Our design will be flexible to include expansion and additional trains to accommodate market opportunities,” Woodside said.
In the past, some analysts have been wary about this proposed capacity, given the rule of thumb that a 5MMtpa LNG development needs around 5 trillion cubic feet (Tcf) of gas in the ground and that Pluto is believed to contain only about 3.6Tcf.
Because of this, it has long been suspected that Woodside aimed to make Pluto an aggregate gatherer of gas.
But with Chevron’s Wheatstone gas find lying nearby and Woodside undertaking further drilling in the area, Voelte said yesterday that the plant would have access to sufficient reserves to produce 5MMtpa of LNG for “many years to come”.
However, WA’s over-heated resources construction market is another hurdle for Woodside to overcome. The project is competing for workers and materials with Chevron’s $A11 billion-plus Gorgon LNG venture, which is due for final approval early next year. The booming Pilbara iron ore mines are also soaking up engineers and skilled tradesmen.
But Woodside believes that it is in a good position because of the pace of its “development planning”.
Pluto’s construction method will be finalised during FEED. But Woodside notes that the “modular” concept – where a lot of modules are built overseas – proved the most viable for Train 5 on the North West Shelf, particularly in the face of skilled labour shortages.
Morgan Stanley analyst Stuart Baker agreed that the resources available for building major developments were tight.
“There are six or seven competing LNG projects in Australia,” Baker said. “Industry-wide we are seeing budgets going up and time delays.”
Nevertheless, Baker assumes Pluto will go ahead as planned, based on strong Asian demand for the fuel.
In December, Tokyo Gas signed a heads of agreement to purchase between 1.5MMtpa and 1.75MMtpa of Pluto LNG for at least 15 years from late 2010. Then, in March, Kansai Electric Power agreed to buy up to 2MMtpa of LNG over a similar timeframe.
The deals, subject to final project approval, demonstrated a strong commitment to Pluto from the two Japanese utilities, which have had long dealings with Woodside via the North West Shelf. Each of the buyers also has an option to buy 5% of the total development.
Macquarie Equities energy analyst Andrews Blakely said that Woodside as 100% owner could aggressively market Pluto’s gas in Asia, particularly Japan.
“The Japanese want to deal with Australia,” he said.
“They like Woodside and the North West Shelf, and Woodside has a fair degree of credibility in Japan.
“If Woodside can make Pluto work, it is going to be a very valuable asset for them.”
The FEED contract for Pluto’s onshore gas plant will be awarded next month to the Foster Wheeler and WorleyParsons JV, which is already doing the engineering design and construction for the Woodside-managed Train 5 expansion.
Options are now being assessed for the offshore FEED contract.
