Energy giant Woodside Petroleum is expected to delay a long-awaited decision on its multi-billion dollar Browse project until oil prices recover.
The Perth-based company and its joint venture partners are scheduled to make a final investment decision on the key offshore floating LNG growth project in Western Australia in the second half of 2016.
Woodside chief executive Peter Coleman last month hinted at further delays to the Browse project, saying the company had not made firm sales of gas which are important to fund the project.
He said the Browse joint venture partners will have to form a “collective view” about pricing forecasts after cost reductions had been offset by lower forward price estimates.
Woodside shelved its plans for a costly $45 billion onshore gas plant development near Broome almost three years ago in favour of pursuing a more economical floating LNG option.
But pricing and costs have changed dramatically since then, opening up the possibility that piping gas onshore could again become viable.
Fat Prophets analyst David Lennox said the company’s proposed floating LNG project was probably at a break-even point at current prices, but now was not a good time to negotiate gas sales following steep oil price falls.
“It’s become a long-running saga,” Mr Lennox said.
He expects Woodside to delay a final investment decision on Browse until oil prices recover and added that the company still had flexibility in how it extracts gas from the remote offshore gas field.
“Now, perhaps with piping becoming cheaper than it was four or five years ago, potentially they could switch,” Mr Lennox said.
“The company will continue to move the project along one step at a time until it can see a brighter horizon with commodity prices.”
Brent futures were trading at $US35.97 a barrel, up 2.48 per cent, from their previous close after Saudi Arabia said it would work with other oil producers to limit oil market volatility.
Meanwhile, former Shell Australia executive Ann Pickard has been appointed as a non-executive director of Woodside, fuelling speculation she could replace chairman Michael Chaney when he is expected to retire next year.
Shares in the company, which recently booked a $US26 million full year profit and slashed dividends, were 45 cents, or 1.8 per cent, higher at $25.50.