Australian operators Woodside and Santos have similar world views on liquefied natural gas focused on optimism about the LNG market, an improving cost horizon and confidence in the quality of their undeveloped gas.

Both companies operate two LNG facilities that are the foundations for their futures and their longevity in the LNG market — Woodside has the North West Shelf and Pluto facilities, while Santos has the Darwin and Gladstone plants.

The focus is on keeping their LNG trains full rather than building new trains, although in Woodside’s case a new train will be built at Pluto to accommodate gas from its Scarborough field.

Final investment decisions had been planned in 2020 on Scarborough and Santos’ Barossa project, but the coronavirus put paid to that, and instead they are looking to sanction in 2021.

Woodside chief executive Peter Coleman, who is retiring in the second half of next year, says there are a number of requirements he wants to see before a final invesrtment decision.

“I'd like to get at least three quarters of stable (oil and LNG) pricing starting to come through," he says.

"It looks like the fourth quarter of this year, we're getting that stable pricing. As long as we start to see a strengthening trend, that will give us some confidence that we can go to FID."

The LNG supply and demand equation is also crucial, adds Coleman, as is the contractor market.

“The pricing we've got currently (for Scarborough) is from 12, 18 months ago. We expect that to get even more competitive so we've got to go back to the contractor market. We'll be doing that in the first quarter of 2021.”

The future ownership structure of the North West Shelf facility should also be clearer in 2021 as the sale of Chevron’s one-sixth interest advances.

Financial and LNG analysts believe there is merit in Woodside boosting its LNG position by acquiring the Chevron interest, and even Shell’s stake.

Santos, meanwhile, is a relatively new LNG operator and is highly motivated to make a success of Barossa and Darwin LNG, given its US$1.5 billion purchase of ConocoPhillips’ interests in the two assets and others in Australia.

Santos believes there will be a global LNG supply gap of 75 million tonnes per annum by 2030, and this is where Australia's brownfield developments, like Barossa-to-Darwin, have an advantage.

Brett Woods, the company’s vice president for midstream infrastructure and low carbon, says Darwin “is a core part of the company’s universe, it's close to our gas resources, it's on the doorstep to Asia and no city in Australia is as close to the customers who require our gas”.

Barossa gas will extend the Darwin LNG facility’s life by 15 to 20 years, he says.

“We'll be delivering a project at the bottom end of the cost curve,” adds Woods. “If you look at the Darwin LNG facility it's in phenomenal condition, well cared for by ConocoPhillips. So we are looking to close our LNG arrangements and deliver project that in the next period,” Woods says.

Santos has a significant cache of undeveloped gas off northern Australia, separate to Barossa. The company is also exploring for onshore gas in the Northern Territory’s Beetaloo basin, which could be piped to Darwin or Gladstone.

LNG

Woodside and Santos on the same track to LNG growth