Woodside Petroleum, Australia's second-largest oil and gas producer, signed an accord to sell as much as 3 million tonnes a year of liquefied natural gas (LNG) to CPC Corp, Taiwan (CPC, 台灣中油), a deal that may be worth up to A$45 billion (US$40 billion).
The LNG will be supplied over 15 to 20 years from the proposed Browse project off Australia's northwest coast, with deliveries starting in 2013 to 2015, Perth-based Woodside said yesterday in a statement to the Australian Stock Exchange. The agreement is preliminary and sets out key terms, including price, it said.
LNG demand in Taiwan, Asia's third-biggest buyer of the fuel, is forecast to rise 31 percent to 10.5 million tonnes in 2010 and to double by the end of the next decade.
Woodside signed a similar initial accord in September to sell the same volume of LNG to PetroChina Co (中石油), which it said then may yield revenue of between A$35 billion and A$45 billion, if confirmed.
"Everyone wants gas, that's not open to question," said Aiden Bradley, an oil and gas analyst at ABN Amro Australia Ltd in Sydney.
"We don't believe terms of agreement contracts with the Chinese or Taiwanese in any way improves the chances of Browse being developed" given the venture partners still need to agree how to develop the field, he said.
Woodside, the operator and 47 percent owner of the undeveloped Browse project, gained A$1.63, or 3.5 percent, to A$48.50 in Sydney trading, snapping three days of declines. The gains beat a 1.6 percent increase in the exchange's benchmark energy index.
Woodside, 34 percent owned by Royal Dutch Shell PLC, said in September that it had held talks with CPC on LNG sales, after Bloomberg reported the company planned to buy as much as 3 million tonnes a year of fuel from the Browse project.
"The deal is excellent in helping make our natural gas supplies more stable and diversified," Bureau of Energy Deputy Director-General Wang Yunn-ming (王運銘) said by telephone yesterday. "Natural gas is clean and good for the environment and we're sticking to our goal to boost demand for the fuel. The CPC deal is helping on this front."
About 80 percent of the nation's natural gas is used in power generation, so stable supply sources are important for electricity supplies, Wang said.
The initial agreement allows Woodside and CPC to negotiate in "good faith" toward an LNG sales contract based on the agreed terms, Woodside said in the statement. The contract is subject to the venture partners agreeing to build the project and getting government planning approval, it said.
The Browse project may have a capacity of as much as 15 million tonnes a year in two or three production units, said Kirsten Stoney, a spokeswoman for Woodside.
BHP Billiton Ltd, BP PLC, Chevron Corp and Shell own stakes in the Browse venture. Most of the partners have rival LNG ventures in the region that they want to develop first, which may delay the sanctioning of the project beyond Woodside's schedule, Bradley said.
ABN expects the project may cost US$20 billion and may start deliveries in 2016 to2018, as many as five years later than Woodside's schedule, Bradley said.
The agreement is Woodside's first long-term supply agreement with Taiwan.
While the accord is solely between Woodside and CPC, it's possible the contract, if confirmed, could be spread between all the Browse partners, Stoney said.