WOODSIDE Petroleum chief executive Peter Coleman has not ruled out acquiring more of Apache Energy’s Western Australian assets, following a US$3.75 billion deal to snap up its stakes in Wheatstone LNG, a WA oil field, and a massive Canadian shale gas play.
Woodside acquired Apache’s 13 per cent interest in Wheatstone LNG, its 65% share of the Balnaves oil project, and a 50% stake of the world-class Kitimat LNG project in the deal, struck 16 December.
The acquisition will see Woodside pay US$2.75 billion for the assets, plus US$1 billion to cover Apache’s sunk costs.
When asked if the deal signalled an end to Woodside’s interest in Apache WA’s assets, Mr Coleman said the area remained “an open book” for the company.
“If any of those Apache assets came onto the market at a price that made sense… then they’d be things we’d look at,” he said.
Mr Coleman said Woodside’s commitments on sanctioned projects and sustaining capital would be about US$800 million per year for the next three years.
The Kitimat shale gas project gives Woodside a 129,499 hectare share of Canada’s Horn River and Liard basins, an area described by Mr Coleman as having “blue sky potential ”.
“The Liard basin is arguably amongst the top shale gas resources in the world,” Mr Coleman said.
Woodside’s share of Kitimat was said to contain up to 40 trillion cubic feet of potential recoverable gas, and Mr Coleman said Woodside had benefitted from entering the deal “at a significant discount to the sunk cost that the seller has already put into it”.
The deal may mark a turning point for Woodside’s relationship with rival Chevron, with the US supermajor the operator on Wheatstone and the other 50% partner on Kitimat.
Despite the strong potential for a single development, the Wheatstone and Pluto LNG projects were developed as separate entities, but Mr Coleman said he was was optimistic about the partnership’s future.
“Expanding the relationship [with Chevron] in my view can only be a positive for us,” Mr Coleman said.
“We very much look forward to working with them in Canada.”
As part of the deal, Woodside has acquired Apache’s operatorship of Kitimat, though Chevron’s superior unconventional knowledge would make it a more appropriate choice to lead the project.
Mr Coleman said shale gas development was not one of Woodside’s core skills and the company was “reflecting” on the operatorship status.
“We’re actually looking forward to working with Chevron on what’s the best operator scenario for us, but I wouldn’t expect that Woodside would take a lead,” Mr Coleman said.
Mr Coleman said the project was situated in a part of the world where costs were going to be challenging, but said the low oil price environment would be countered with strong efficiencies.
“There’s no doubt about it – it is not the Gulf Coast of the US,” he said.
“These are green field sites and there’s quite mountainous terrain to lay a pipeline across.
“It doesn’t matter whether the price is $100 or whether it is $20 – it is around the cost of the business.”
Wheatstone and Julimar-Brunello to provide upside
Mr Coleman said the LNG assets were a “natural fit” to Woodside’s portfolio, with the deal to boost Woodside’s proven reserves by 19%.
He said it was “very, very unusual” to be able to buy into a project as developed as Wheatstone, where capex and the resource base were already de-risked.
When asked whether Woodside would look to get involved in the operatorship of Wheatstone, Mr Coleman said it would be “presumptuous” to suggest anything was on the table.
“Commissioning…just looking at it from 10,000 feet, [it is] something we could add value to,” he said.
“Equally though, we need to talk to Chevron about that because they’ve probably…got quite robust plans in that regard.
“I think we need to close the deal first and then we’ll work through the opportunities.”
Mr Coleman said Woodside would “look very hard” at upping its Wheatstone stake if the equity came at the right price.
“I think everything has a price,” he said.
He said it was “way too early” to talk potential synergies with Pluto infrastructure or the Clio and Acme gas resources, but acknowledged Julimar-Brunello’s proximity to the Pluto fields.
“We haven’t even sat down at all with the operator to talk about those synergies,” he said.
“We’ll be looking for synergies across our operations. That’s a natural thing for us to do in that regard.”
Mr Coleman said because Woodside was at a “low point” with their own development programs they had people and resources with which to assist their new joint venture partners.
Mr Coleman said Woodside was in ”advanced discussions” with Western Australia’s Department of State Development on its domestic gas obligations, but did not confirm or deny the suggestion that a gas import facility may be built in south WA.