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Woodside plans to boost LNG output on Asian demand

MELBOURNE, Australia--Woodside Petroleum Ltd. (WPL.AU) is positioning to lift gas-export capacity in coming years in expectation that still-rising supplies of liquefied natural gas will be absorbed by higher Asian demand.

On Wednesday, the Australian energy company said it is planning to increase production at its Pluto LNG plant in Western Australia and potentially position the facility as a hub for undeveloped gas fields in the region. The company is seeking to leverage its position as an investor in several big gas fields around the country's northwest.

Woodside's profit rebounded last year, jumping to US$868 million after being almost wiped out the year before by US$1.1 billion in asset impairments and charges following the slump in prices.

Peter Coleman, chief executive of Perth-based Woodside, said the mid- to longer-term demand outlook for LNG, natural gas chilled to a liquid so it can more easily be transported, remains strong and new markets for the fuel are being established.

Global supply currently outstrips demand, after multibillion-dollar investments in new facilities in Australia and as the U.S. begins exporting. Yet Mr. Coleman said demand continues to grow, and unlike the oil industry there are no stockpiles of LNG or loaded cargo ships floating at sea.

Woodside initially intends to tap existing gas supplies around its Pluto operation and drive its production hard to lift output. It also will consider adding another smaller-scale production line at the facility and will lobby for gas from the undeveloped Scarborough and Browse fields off west Australia to be funneled through Pluto's operations, if that provides a better return than the floating LNG plants currently envisaged by the venture partners.

A new off-the-shelf production line could be added quickly to Pluto, lifting output by as much as 1.5 million metric tons a year, Mr. Coleman said. At the same time, Woodside is building the infrastructure needed to supply Pluto's LNG to the local mining and marine industries as a cheaper alternative to diesel, helping companies meet tougher emissions rules and introducing new buyers for Woodside.

Woodside has forecast a modest fall in oil-and-gas output this year, after a rise of 3% last year to 94.9 million barrels of oil equivalent thanks in part to Pluto, an onshore facility that started up in 2012 and last year produced 5 million tons, 16% above its original design capacity. The company has forecast its production will rise about 15% between 2017 and 2020, helped by the start-up of Chevron Corp.'s $34 billion Wheatstone LNG project in Western Australia and the development of Woodside's Greater Enfield oil project.

Mr. Coleman said it was unlikely there would be large single buyers of LNG in the next few years that would commit to new supplies and underpin big LNG developments, but there remains scope for smaller-scale developments and for existing operations to collaborate to lower costs by sharing facilities, supplies and maintenance. For Pluto, it is about accelerating growth to meet demand opportunities expected in 2020-2025, he said.

The LNG market needs an additional 16 million tons a year in capacity to be added annually to meet expected demand, although only 6 million tons of capacity was approved by companies in 2016 and 6 million is forecast for this year, Mr. Coleman said. Studies suggest that by about 2023, the rise in demand will outpace projected supply.

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Woodside plans to boost LNG output on Asian demand

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