The CEO of Woodside Petroleum Ltd said this week Australia’s largest independent oil and natural gas producer will soon decide whether to continue to invest in Sempra Energy’s Port Arthur liquefied natural gas (LNG) export project in Texas.
Peter Coleman, speaking at the World Gas Conference in Washington, said the $8 billion-$9 billion project’s ability to provide Woodside with an adequate return is “very challenged,” Reutersreported.
“We’ve got to make some decisions pretty soon about our continued pursuit (of Port Arthur) with Sempra,” said Coleman, adding Woodside has been paying part of the project’s development costs.
“What we’ve been doing is just paying our way (with Port Arthur), and whether that is going to give us an adequate return, I would say today that is very challenged,” Coleman said.
In February 2016, Sempra and Woodside agreed to share the cost of developing Port Arthur, which could result in Woodside buying half the project once the parties made a final investment decision to build the facility, Reuters reported.
Officials at San Diego, Calif.-based Sempra, which announced Tuesday Polish Oil & Gas Co (PGNiG) agreed to buy LNG from Port Arthur, were not immediately available for comment.
The Port Arthur project includes two liquefaction trains capable of producing roughly 11 million metric tonnes per annum (MTPA) of LNG, up to three storage tanks and facilities to load LNG onto ships, Kallanish Energy reports.
Last week, Sempra said it selected Bechtel as the engineering, procurement and commissioning (EPC) contractor for Port Arthur.
Last year, Sempra signed a memorandum of understanding with Korea Gas Corp (Kogas) as a potential purchaser of LNG from and equity participant in Port Arthur.
As consumers shift from coal to cleaner burning gas for power generation and other uses, global LNG demand is expected to grow about 4% per year through 2035, according to data from Woodside.
To meet that demand growth, Port Arthur is one of more than 24 U.S. LNG projects searching for buyers so they can make a final investment decision.
In Canada Woodside is working with Chevron to develop the Kitimat LNG project in British Columbia, with a capacity of 10 MTPA. Coleman did not say when the company would make a final investment decision on Kitimat.
Woodside expects to produce between 85-90 million barrels of oil-equivalent (MMBOE) in 2018, most of which will come from its Australian LNG projects, up from 84.4 MMBOE in 2017, according to a forecast in its 2017 full year results. LNG represents about 69-71 MMBOE of the company’s 2018 production guidance.