Woodside Eyes Indian Gas Market

Peter Coleman, CEO of Woodside, Australia’s largest independent oil and gas company, has been visiting India. While there, he signed an MoU with Adani Enterprises that will see the two firms pursuing broad-ranging cooperation on LNG imports and LNG terminal development in India.

“Current expansions in Australia’s LNG supply capacity, which sees Australia poised to overtake Qatar as the largest global LNG supplier by the end of the decade, present a unique opportunity to grow the relationship between our two countries,” said Coleman during a presentation to the Indian business community. “Indian demand for liquefied natural gas is forecast to grow significantly in the coming decade from around 15 million tons per annum in 2015 to approximately 35 million tons per annum in 2025.”

Woodside has a diverse LNG portfolio that Coleman believes has the flexibility and capability to deliver to the Indian market. “North West Shelf and Pluto LNG equity volumes of 6.6 million tons per annum underpin our supply options. In mid-2014, we added new trading volumes and third party gas from Corpus Christi LNG in the US, bringing supply optionality and geographic diversity to our portfolio.”

In December 2014, the company also entered into an agreement to acquire Apache’s interests in Wheatstone LNG. “In total, these transactions will add more than two million tons per annum of future supply to our portfolio. At FID, equity volumes from our Browse, Sunrise and potential projects in Western Canada will add material additional volumes. Looking out to around 2020-2025, Woodside’s portfolio will contain a significant mixture of equity operated volumes, balanced with geographically diverse third party and trading volumes,” says Coleman.

“Woodside is also building longer-term capacity through re-balancing our global exploration portfolio. In the last 18 months we have secured high-quality exploration acreage in eight countries, and we are working towards exploration drilling in the coming years.”

Coleman is hopeful that Indian companies might co-invest in projects. Woodside already has significant investors from Japan and China, and early investment by foundation customers has been critical to the development of some projects. “This cooperation has seen us safely and reliably deliver more than 4,000 cargoes of LNG over 25 years to Asia.”

After 2020, many buyers will be looking to emerging supply regions as a solution, but these regions face many challenges, says Coleman. He sees the requirement for new LNG supply investment increasing very quickly. “We need more than 50 million tons per annum of new projects to take investment decisions (FID) in the next few years to avoid a shortfall as early as 2023. Delays or the deferment of project FIDs will lead us to a supply crunch.”

Woodside is the ninth largest publicly listed pure oil and gas exploration and production company in the world, and Bloomfield analysts say that the company stands out as being better positioned than the super-majors and many national oil companies to survive and thrive in the current oil price downturn.

On the key measure of how much cash they generate and retain, Woodside and ONGC of India lead the 75 companies in the Bloomberg World Oil & Gas Index on a relative basis. That free cash flow gives them the flexibility to snap up assets on the cheap, says Bloomberg.

Woodside has a free-cash-flow margin of 44 percent, while ONGC, India’s biggest explorer, has a margin of 24 percent, according to the data compiled by Bloomberg. That compares with 2.9 percent at Exxon Mobil and one percent at ConocoPhillips.

Woodside’s recently released fourth quarter report for the period ending December 31 reports a record annual production of 95.1 million barrels of oil equivalent (MMboe), up 9.3 percent on 2013. The company also achieved record annual sales revenue of $7,076 million up 11 percent on previous record of $6,348 million, in 2012.