WOODSIDE Petroleum’s failure to reach a final investment decision on its multi-billion dollar Browse development has cost the company a long-term sales and purchase agreement for more than 1 million tonnes of liquefied natural gas which was earmarked from the project.
The Australian petroleum company delivered the news in a statement today, stating that Japan Australia LNG (MIMI Browse), also a minority stakeholder in Browse, had terminated its sales contract to purchase about 1.5Mt of LNG from Browse per year.
The agreement, announced in 2012, was conditional upon a final investment decision on Browse being undertaken by 31 December, 2013.
However, the decision by the Browse joint venture partners to abolish plans for an onshore development in favour of floating LNG technology has resulted in the delay of an investment decision.
With Woodside opting to enter basis of design for a FLNG development concept, Woodside noted that both parties had recognised that the condition precedent for the sales and purchase agreement would not be satisfied.
“Consequently, MMI has today given Woodside notice terminating the SPA,” Woodside said.
Despite the cancellation of the offtake agreement, Woodside said the joint marketing agreement with MIMI, which would involve the parties jointly marketing co-mingled LNG volumes to the Asian market, had not been terminated.
While Woodside’s shares dropped A33c to A$38.54 at one point during trade, Woodside assured strong progress was being made regarding offtake talks for Browse LNG.
“Woodside and MIMI continue working actively on marketing of co-mingled LNG volumes in the Japanese market,” the company said. “Woodside remains in ongoing discussions with other regional customers regarding potential sales from its portfolio of Australian LNG developments, including Browse.”
In May 2012, Woodside inked a US$2 billion deal with MIMI Browse which gave the Japanese trading house a 16 per cent interest in the East Browse joint venture and an 8% stake in the West Browse joint venture.
The agreement also involved Woodside entering into a separate memorandum of understanding with MIMI’s parent companies, Mitsui & Co and Mitsubishi Corporation, with respect to potential collaboration and alliance on other opportunities globally.
The Browse project, operated by Woodside, is also being developed alongside Shell Australia, BP Developments Australia and PetroChina.
The Browse project involves the consortium commercialising three gas and condensate fields which lie in the Indian Ocean, 425 kilometres north of Broome in Western Australia.