BP has stood down contractors working on its biofuel plant just weeks before discovering if its adjacent green hydrogen project will win $1 billion of government backing.
Woodside and Chevron have agreed to an asset swap under which Woodside will acquire Chevron’s interest in the North West Shelf Project, including related oil and carbon storage projects.
In return, Woodside will transfer all of its interest in the Wheatstone LNG project to Chevron and receive up to $US400 million in cash from the US major.
The deal's announcement comes a week after the state government approved an extension of production at the NWS plant to 2070.
The huge shake-up in the WA gas sector provides a clearer path for Woodside to develop its Browse gas fields off the Kimberley coast.
Woodside chief executive Meg O'Neill said the transaction created more opportunity to fill the increasing amount of spare capacity at the pat near Karratha.
“It also provides greater alignment and improves the commercial prospects for the proposed Browse to North West Shelf Project," she said.
Woodside has struggled for years to negotiate an agreement to process Browse gas through the NWS plant, which now has spare capacity due to its declining offshore gas production.
It has been widely reported that Chevron, one of only two NWS participants not also an investor in Browse, was driving a hard bargain. Thursday's deal leaves Shell as the only NWS equity holder without a stake in Browse.
Extending the life of the North West Shelf plant still needs approval from federal environment minister Tanya Plibersek.
Woodside is also awaiting an assessment of the Browse project from WA's Environmental Protection Authority which earlier this year was leaning towards recommending against it due to concerns about whales, turtles and oil spills near the pristine Scott Reef.
Like the life extension of the NWS plant, the Browse project also needs federal approval.
The Chevron deal indicates Woodside is confident it will receive all these environmental approvals.
If it does not, it has forsaken an interest in a modern long-life LNG project for a greater stake in a declining asset with a massive decommissioning liability.
Woodside's deal with Chevron is similar in some ways to its purchase of BHP's petroleum division in 2021.
BHP had a small stake in the Scarborough gas field that Woodside was keen to develop and the miner was widely understood to be "stepping on the hose" as its gas-focussed partner tried to push the project forward.
The deal cleared the way for Woodside to sanction the Scarborough project months later but left the Perth player with a 50 per cent of the ageing Bass Strait oil and gas operation and its significant decommissioning liabilities.
The details of the deal
Woodside gets from Chevron:
a one-sixth stake in the offshore and onshore gas operations of the NWS project, taking its stake to 50 per cent
a one-sixth stake in the NWS oil project, taking its stake to 66.7 per cent
a 20 per cent increase in the nascent Angel carbon storage project, taking its stake to 40 per cent
up to $US400 million in cash: $US300 million when the deal completes - expected in 2026 - and up to $100 million contingent on the performance of well Woodside drilling to supply Wheatstone
In return, Chevron receives:
a 13 per cent interest in the Wheatstone platform, pipeline to shore and gas processing plant near Onslow, taking its total equity to 77 per cent
a 65 per cent stake in the Julimar Brunello fields operated to date by Woodside that supplied gas for its 13 per cent share in Wheatstone's processing capacity
The deal will not complete until 2026 as it is subject to Woodside completing its Julimar phase 3 project and handing its operation over to Chevron.
The deal is also subject to joint venture partners not exercising their pre-emption rights, clearance by the Foreign Investment Review Board and a review by the Australian Competition and Consumer Commission.
The ACCC will be most interested in WA's gas market.
In the 12 months to June 2024, Chevron supplied 26 per cent of WA as demand. Santos produced 24 per cent and Woodside was the third biggest producer at 19 per cent, according to the AEMO WA Gas State met of opportunities published on Wednesday.
The Woodside share price dropped almost two per cent when the market opened.
I worked in oil & gas in commercial and engineering roles for 20 years. Since 2016 I have written for The West Australian, The Saturday Paper, RenewEconomy, Michael West, Boiling Cold and WAtoday.
