Woodside calls for ‘urgent’ reforms amid threat to Scarborough gas

Woodside narrowed its production guidance for the full year of calendar 2023 to between 183 million and 188 million barrels. That compared with previous guidance of between 180 million and 190 million barrels, meaning the mid-point of guidance rose marginally.

Bernstein Research analyst Neil Beveridge described the revenue for the quarter as “in line” with expectations. But he noted that higher North Asian LNG spot prices in the December quarter to close to $US20/MMBTU and oil-linked contract LNG prices of $US12/MMBTU “are positive tailwinds that could lead to beat vs full-year consensus”.

Shares in Woodside were up 2.2 per cent to $36.88.

Ms O’Neill pointed to “strong” process at projects over the quarter, with the start-up of the Shenzi North venture in the US Gulf of Mexico ahead of the 2024 target date. Production is also continuing to ramp up from the second phase of the Mad Dog oil project – also in the Gulf of Mexico – which started up in April.

Woodside also received Mexican regulatory approval during the quarter for the Trion oil project where development work has now got under way.

Construction of the Scarborough project, which includes the expansion of the Pluto LNG plant, is now 46 per cent complete, but Ms O’Neill pointed to risk to the schedule from a Federal Court ruling in late September that invalidated an approval for seismic testing for the venture, while still holding to the targeted 2026 start-up.

She said the decision highlights “the urgent need for reform of Australia’s offshore approvals process”.

“Uncertainty over approvals has the potential to add cost and delays to any offshore activities to be undertaken in Australia,” she said.

“In the case of gas projects, such uncertainty threatens the delivery of much-needed new supplies to the Western Australian domestic market, as well as undermining the confidence of our regional trading partners.”

The Scarborough project involves the development of an offshore field, where Woodside is partnered by Japan’s Sojitz Corporation and Sumitomo Corporation, and the expansion of the onshore Pluto LNG plant near Karratha, which Global Infrastructure Partners is backing.

At the proposed H2OK hydrogen project in Oklahoma, a final investment decision had been due by year-end, but Ms O’Neill said that had been delayed “pending clarification of government tax incentives and the finalisation of offtake agreements”.

Woodside did not provide a revised target date for a go-ahead on the project, which is expected to qualify for incentives under the Biden administration’s Inflation Reduction Act.

It lowered its guidance for capital expenditure in 2023 as a result of the project delays. The figure is now expected to be between $US5.7 billion and $US6 billion, compared to the previous guided range of $US6 billion to $US6.5 billion.