Woodside shares have shown slight upside movement on the revelation that California based Bechtel engineering group has been selected by Woodside Petroleum to build a second LNG train at Pluto as a part of Scarborough gas resources development.
ASX listed oil and gas company Woodside Petroleum Limited announced that it has chosen privately owned US engineering company Bechtel Corporation as a contractor for the proposed brownfield expansion of company’s Pluto Liquifies Natural Gas (LNG) facility located on the Burrup Peninsula in Western Australia. The expansion activity will include the construction of LNG train 2 at Pluto with a capacity aimed at four million and five million tonnes of LNG a year. This will accelerate the development of 7.3 Tcf (2C, 100%) Scarborough gas field.
The contract is to be drawn out for front-end engineering and design (FEED) phase in order to develop the second LNG train at Pluto as a part of Woodside’s LNG expansion plan. However, the terms of contract have yet not been finalized.
Woodside Petroleum Limited told that it intends to work closely with Bechtel Corporation in making FEED contract which will also include the option for the full construction of train, subject to a positive final investment decision. The FEED entry is expected to occur in first quarter of calendar year 2019 as per company’s information. Whereas, investment decision may be finalized by 2020 with the aim to prepare Train 2 ready by 2024, subject to necessary approvals.
CEO Peter Coleman stated that the additions at Pluto LNG facility will provide the infrastructure base that is required for future gas resources business in Western Australia.
Pluto LNG plant is built for lean gas and nitrogen removal which is operated by Woodside in the Burrup Hub of western Australia. It receives gas resources from Scarborough reservoir through a ~430 km pipeline which is then processed further for the removal of nitrogen. Scarborough is a gas resource field that contains dry gas of 7.3 Tcf. It is located approximately 300 km offshore in the Carnarvon Basin, Western Australia.
Woodside said that alignment of company’s equity in both the upstream Scarborough gas resource and downstream Pluto LNG infrastructure can significantly provide greater control and certainty of extensive onshore development. The estimated cost for upstream is $6.0 billion which has an expected capacity of 7–9 Mtpa while the downstream may cost between $2.5 – $3.7 billion for a targeted capacity of 4–5 Mtpa.
The company seems to have the potential to realise the benefits from the extensive onshore developments at Scarborough gas field, mainly driven by a low-cost brownfield expansion of company’s LNG facility at Pluto.
The share price of Woodside Petroleum Limited has edged up by 0.875% to last trade at $38.030 on 10th October 2018. The stock has seen a performance change of attractive +32.14% over the past 12 months. However, WPL today closed at a PE of 23.80 x with market capitalization of $35.29 billion.
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