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Woodside Energy Group Ltd (ASX: WDS) has entered into a substantial agreement, worth a staggering US $1.4 billion, to divest a 15.1% interest in its flagship Scarborough liquefied natural gas (LNG) project to Jera Co, Japan's preeminent power producer. This strategic move comes as consumers strive to secure a stable and long-term supply of LNG.
More about the deal
The comprehensive deal encompasses a US$740 million acquisition cost and reimbursement for the project's expenditures off the Western Australian coast, as revealed by the Perth-based energy supplier in a statement last Friday.
This development follows the preceding year's sale of a 10% stake in the controversial project to LNG Japan Corp, a venture owned by trading giants Sumitomo Corp and Sojitz Corp.
The acquisition by Jera signifies the project's paramount importance to Japanese consumers and their unwavering confidence in sustained demand, according to Woodside's Chief Executive Officer, Meg O'Neill.
Scheduled to initiate its inaugural LNG shipment in 2026, Scarborough is poised to yield an estimated eight million tonnes per annum of this critical heating and power plant fuel.
Despite its potential, the development has become a focal point for climate activists vehemently opposing the expansion of new fossil fuel initiatives.
Another agreement
In addition to the stake sale, Woodside has also entered a non-binding agreement for Jera to procure six LNG shipments annually from its portfolio for a decade starting in 2026, as outlined in last Friday's statement.
Japan, being the second-largest LNG buyer globally, is intensifying efforts to secure additional gas, spurred by the 2022 energy crisis, compelling the government to urge companies to fortify their supply chains and invest in pertinent projects.
The recent U.S. decision to temporarily halt approvals for future export projects has further prompted Japanese buyers to explore alternative sources. Jera, a significant player in global LNG imports, has expressed concerns about potential implications for global energy security stemming from this shift.
Yuichiro Kato, an executive officer at Jera, emphasized at a press briefing last Friday that the Scarborough acquisition will significantly contribute to the stable supply of energy in Japan and the broader Asian region.
Share performance on Monday
Woodside experienced a marginal fall of 1.67% on Monday on ASX to close at AU$30 apiece.
