Woodside Takes Control of Scarborough Field

Woodside

By MarEx 2018-02-13 22:47:23

Australia's biggest oil and gas producer, Woodside has agreed to buy ExxonMobil's share of the Scarborough gas field located in the Carnarvon Basin, offshore Western Australia.

Woodside will acquire an additional 50 percent interest in WA-1-R which contains the majority of the Scarborough gas field. Upon completion of the transaction Woodside will have a 75 percent interest in WA-1-R and a 50 percent interest in WA-61-R, WA-62-R and WA-63-R.

In November 2016, Woodside completed the acquisition of half of BHP Billiton's Scarborough area assets which include the Scarborough, Thebe and Jupiter gas fields, which are estimated to contain contingent resources (2C) of 2.6 Tcf of dry gas (8.7 Tcf, 100 percent). 

CEO Peter Coleman said: “Our Burrup Hub concept is advanced by our announcement today of an increased stake in the Scarborough gas field. The development concept involves maximizing existing infrastructure at the Pluto LNG plant to meet a market gap we expect will emerge from the early 2020s.”  

Saul Kavonic, Australasia principal analyst at Wood Mackenzie, said: “Woodside's acquisition of Scarborough may bring on the next wave of Australian LNG investments, particularly brownfield through backfill and leveraging existing infrastructure. Despite the distance and dry nature of the gas, a Scarborough development via existing infrastructure at Burrup will be amongst the lowest cost pre-FID LNG projects in the world because of the synergies.

“With viable economics, the obstacle has always been JV alignment. With Exxon out, and the motivated Woodside now in the driver's seat,  the alignment hurdles are now largely cleared away. We expect to see Scarborough gas developed as backfill to Pluto, with some molecules also sent to North West Shelf either complementing - or competing with - any Browse development. A small expansion at Pluto may also make sense to accelerate Scarborough gas development, taking advantage of the excess capacity in a lot of the existing Pluto infrastructure,” said Kavonic.

“The price paid suggests Exxon received very good value, particularly since market sentiment is lower than when the BHP stake sale occurred, and the Thebe resource is not included in this deal. But this is a clear win-win deal, delivering on a strategic imperative for Woodside growth, and synergies with Woodside's core operational footprint.

“A lot of Woodside capital is due to be chewed up in coming years with the Senegal, Scarborough and Browse developments targeting parallel progression. All face uncertainties, and risk delays, across technical and commercial fronts, but Scarborough could now prove the most 'do-able' of the three,” he said.

“Given Woodside's motivation and synergies, time is now coming for the development of one of Australia's oldest gas discoveries left dormant for decades. It's time for Scarborough fair.”

In announcing the purchase, Woodside also announced a $1 billion full-year 2017 profit. ExxonMobil's share of Scarborough was purchased for $440 million. Woodside estimates its LNG flow will be boosted by 40 percent when Scarborough production starts in 2025.