LEADING international energy analyst Wood Mackenzie’s latest report shows that the North West Shelf (LNG project could have up to seven million tonnes per annum (mmpta) of spare capacity available by 2027. This equates to 40% of the project’s nominal capacity.

Wood Mackenzie senior analyst Daniel Toleman said the Woodside-operated five-train NWS facility has been producing LNG since 1989. Next year production capacity becomes available for the first time.

“Decisions on how to fill this gap need to be made now, not only because time is running out, but also because the joint venture is breaking-up. Chevron is running a process to sell out of the NWS, and we see other majors likely to follow,” Mr Toleman said.

“We see two windows of opportunity for backfill: one for smaller projects with short lead times, and the second for larger-scale resources that can extend the life of the NWS through to 2050.”

Wood Mac says good progress has been made on near-term backfill small-scale projects.

“We believe the Pluto and Waitsia projects will add incremental supply into the NWS from 2022. However, these projects are only short-term solutions.

“In the longer term, large-scale developments are needed. The Scarborough and Browse developments, both operated by Woodside, are the most likely backfill options due to their size. Other possible candidates, such as Clio-Acme, or excess gas from Greater Gorgon field development, now look unlikely.”

Mr Toleman said that however, neither the Scarborough nor Browse developments are straight-forward to deliver. The former is currently slated to supply a new second train at the Pluto plant, while the latter is a remote, complex, carbon-intensive and high-capex greenfield mega-project. As such, it faces a myriad of challenges in current market conditions.

“Challenges aside, there are compelling reasons for keeping NWS full. Once third-party gas flows through the plant, partners will receive a tariff for liquefaction. The government will receive additional tax revenue, the Dampier to Bunbury pipeline operator receives more revenue and there will be more domestic gas supply for the local market.”

“Upstream participants can also monetise undeveloped resources and gain access to potentially higher LNG prices on a low capital outlay.”