Home > James Price Point LNG plant would have cost $80bn: Woodside

James Price Point LNG plant would have cost $80bn: Woodside

Editorial
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Woodside has revealed that building a LNG processing plant at James Price Point was set to cost $80 billion and would have put the company at risk of collapse.

Woodside scrapped plans to develop Browse through the onshore facility in April and faced a backlash from politicians and community members when it confirmed a floating LNG plant would be built instead.

Woodside chief Peter Coleman has previously called for an end to the "hollow discussion" around the onshore development claiming the economics didn’t stack up.

Today the company chose to put a multi-billion figure on the onshore facility for the first time in a move which further highlights the massive costs hamstringing Australian oil and gas projects.

"We invested about 4.5 million man hours and had hundreds of Woodsiders who dedicated years trying to come up with a way to make this land-based development commercially viable," Woodside vice-president Roger Martin wrote in an opinion piece in The West Australian newspaper.

"When the final number came in at more than $80 billion, it was obvious these efforts were in vain."

Martin said that modelling showed Woodside’s share of developing the project was estimated at $25 billion, almost as much as the whole market value of the company.

"Effectively, we would have spent almost the entire value of our company on an uneconomic project," he wrote.

"With just a modest cost overrun we could have put Woodside itself at risk, an organisation which has taken almost 60 years to create and which has played a critical role in the development of Australia's oil and gas industry."

Western Australian Premier Colin Barnett has been one of the most vocal critics of Woodside’s decision to pursue FLNG.

Barnett has been vehemently opposed to the development of Browse through a floating option, claiming it will lead to less jobs, increased safety risks and a loss in investment opportunities for WA.

"If the project is offshore, there's very few jobs for Australia, the whole structure will be built offshore, and indeed there'll be no gas coming onshore at all," he said.

"That'd be a disastrous result for Australia and Australia's natural resources."

Barnett has indicated he is prepared to play hardball to ensure gas is processed onshore.

It is estimated that about one-third of Browse gas is located in state waters.

However FLNG has been touted as the saviour of Australia’s LNG industry as companies say high labour costs, productivity issues and IR laws are affecting the nation’s competitiveness.

Earlier this year the LNG industry warned $150 billion worth of investment in Australia could be lost if the high costs of building major projects is not fixed within eighteen months.

Coleman said the move to FLNG would put WA ate the forefront of technological advancements in the industry.

"It provides the opportunity for Western Australia to become an industrial, operational and technology centre for excellence for floating LNG worldwide,” he said.

"This agreement enables Woodside, as operator of the Browse LNG development, to strengthen our development and operational capabilities through the potential use of Shell's design one, build many FLNG technology."

The technology is being used for the first time at Shell’s Prelude gas field off northern Western Australia and allows for the development of gas fields considered too remote or too small to develop via traditional methods previously.

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