Woodside nominates northwest for LNG project

Woodside Petroleum, Australia's second-biggest oil and gas producer, has picked a site on the far northwest coast for its Browse LNG project and said it would "strongly" urge its partners to agree to the location.

Woodside's decision, which follows an A$1.5 billion ($1.88 billion) agreement reached with Aboriginal groups, meant Japan's Inpex would have to reassess its choice of Darwin for its A$20 billion Ichthys liquefied natural gas project, said Western Australian Premier Colin Barnett. Inpex remained committed to Darwin, president Naoki Kuroda said.

The Browse and Ichthys fields are among untapped gas deposits off Australia's undeveloped Kimberley coast, where more than a third of the nation's known offshore gas is located.

The agreement reached this week between Woodside, Western Australia and Aboriginal groups may lead to an onshore LNG hub that could be used by several ventures.

"There's a lot of water to flow under the bridge before LNG starts to be shipped out from that site," said Peter Strachan, an analyst at Perth-based StockAnalysis. "The other Browse LNG parties would have to take a close look at it, while Inpex is already making plans to move their gas into Darwin harbour."

Woodside's Browse LNG partners, which include BP and Chevron, are still studying other options for the location of the onshore plant, including piping gas more than 800km south to existing plants at Karratha, the Perth company said on Thursday in a statement to the Australian stock exchange.

The partners may make a decision "possibly within weeks" on where to process Browse gas, said Woodside chief executive officer Don Voelte.

"We will have to take them through the economics and have to take them through our position on these issues," Voelte said.

"We are talking tens of billions of dollars here."

Woodside, which has an initial agreement to sell Browse LNG to PetroChina and Taiwan's CPC, might start shipments in 2015, he said. Barnett said details of Woodside's share of the compensation package for Aboriginal groups were confidential.

Inpex and partner Total last year decided to take gas from their Ichthys field about 850km east to Darwin for processing after an earlier plan to build a plant in the Kimberley region met opposition from environmental and Aboriginal groups.

Inpex and its partner faced an "interesting scenario" on where to build their plant, Barnett said. The hub site at James Price Pt is less than half as far from the Ichthys field as Darwin in the neighbouring Northern Territory.

Woodside had an "open invitation" to Inpex to come back and build its plant at the hub site, where companies could share jetties, storage tanks and power plants, Voelte said.

LNG is gas chilled to liquid form for transport by tanker to destinations not connected by pipeline.

- BLOOMBERG