US supermajor Chevron has been unable to sell its one-sixth equal stake in the Woodside-operated North West Shelf LNG project in Australia after failing to tempt other players.
Chevron’s interest in the nation’s maiden and largest LNG project, which had been marketed since mid-2020, is no longer classified as “held for sale”.
Chevron chief executive Mike Wirth admitted negotiations with undisclosed potential bidders did not achieve acceptable offers.
“We’re not in a position where we need to sell assets to generate cash,” Wirth told analysts alongside announcing the company’s fourth quarter 2021 results.
One issue that could have made selling the NWS asset less attractive to Chevron relates to the decommissioning liability regulations put in place after it marketed its NWS stake around 18 months ago.
This would have seen the US heavyweight still having to pick up the tab if a new buyer could not afford its decommissioning liability.
However, Wirth indicated that Chevron was more than happy to retain its 16.67% interest in the 16.9 million tonnes capacity NWS liquefaction project.
“Obviously we’re in a market today where LNG demand is very high and there is a lot of gas in Australia still to run through these plants,” he said.
“It’s a good asset to generate strong cashflow... and so it’s a nice part of our portfolio.”
The NWS liquefaction facilities had hoped to secure feedstock gas from Woodside’s Scarborough field, but these resources will now flow to the Pluto LNG project.
Meanwhile, the Browse field, earlier touted as another potential source of feed gas for the depleting five-train NWS plant, has seen its sanction postponed.
On the plus side, the NWS project has secured gas from the under-development Waitsia field onshore Western Australia.
Against this backdrop, NWS project operator Woodside is set to seek shareholder approval to buy compatriot BHP’s oil and gas assets. However, this acquisition would boost its NWS holding to a one-third interest and with it comes a much heavier decommissioning liability.
The other three equal partners in the NWS Venture are BP, Shell and Japan Australia LNG (MiMi).
Woodside had been suggested as a likely purchaser of Chevron’s stake, but that was before Woodside agreed the merger deal with BHP’s petroleum division.
Chevron in June 2020 revealed its NWS interest divestment plan, noting it had received “a number of unsolicited approaches from a range of credible buyers”.
"The NWS project is shifting its focus towards becoming a globally competitive third-party tolling facility, and this is the appropriate time for Chevron to consider fair value proposals from potential buyers for its interest,” a Chevron spokesperson said at the time.
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