CNPC to pay BHP $1.6 billion for 10% of Browse LNG
The super giant China National Petroleum Corporation (CNPC or PetroChina) is to acquire the 10% stakes held by BHP Billiton in the $40 billion capital expenditure Browse LNG project.
In practice the transaction is based on PetroChina to pay $1.6 billion to BHP Billiton for:
– 8% of the large East Browse project
– 20% of the small West Browse project
The combination of shares in both projects correspond to 10% of the whole Browse project.
This agreement comes in a challenging context where all the Australian projects for the production and export of liquefied natural gas (LNG) see their schedule suffering from delays and their costs spiraling up because of the labor costs and shortages.
In addition the onshore part of the Browse LNG project planned to be located in James Price Point on the northwestern coast of Australia faced constant opposition from local environmentalists and Aboriginal landowners.
The Australian Woodside is the operator of the Browse LNG project initiated with BP, Chevron, Shell and BHP Billiton.
Originally estimated to cost $30 billion capital expenditure at that time the delays, the lack of local acceptance and the costs increase to $40 billion gave as many reasons and opportunities to reconsider their position in the joint venture.
In 2012, Woodside sold 15% of its shares to a Japanese consortium made of Mitsui and Mitsubishi Corp for $2 billion
Shell and Chevron swap assets between the Carnarvon Basin and Browse blocks giving the opportunity to Chevron to step out of the Browse LNG project and concentrate gas reserves around its own Wheatstone LNG project.
This swap operation gives Shell:
– 25% of East Browse
– 35% of West Browse
Actually, the working interests within the Browse LNG project are shared between
– Woodside 31% is the operator
– Shell 27%
– BP 17%
– Mitsui and Mitsubishi Corp 15%
– PetroChina 10%
In June 2011, Woodside signed an agreement with the Arborigenal groups to secure onshore site of Browse LNG Precinct near James Price Point , 60 kilometers north of Broome in Western Australia.
Shell to propose FLNG to save costs on Browse LNG
The front end engineering and design (FEED) of this onshore Browse LNG project has been completed on first half of 2012 so that Woodside and its partners were planning to make the final investment decision (FID) on first quarter 2013 for first shipment of LNG carriers in 2017.
From this FEED, the Browse LNG project should include in actual configuration:
– Two Tension Leg Platforms (TLP)
– Offshore Central Processing facilities platform
– Gas compression platform
– Utilities accommodation platform
– Modular Platform Drilling Rig (MPDR)
– 1,200 kilometers subsea gas and condenstate export pipelines
– Three onshore LNG Trains of 4 million t/y each
– Marine facilities
– Onshore utilities and accommodation
– Onshore LNG storage and facilities.
The size, distance from shore, onshore location contribute to the complexity of the Browse LNG project and the escalation of the costs.
In this context, speculations started in November about an alternative solution based on floating LNG that could be favored by Shell
To produce the same quantity of LNG as the actual onshore design, Browse would need four FLNG vessels of the same size as Shell Prelude currently in construction by Technip and Samsung.
If the Browse LNG project were to reach $40 billion capital expenditure, as announced by Woodside so that BHP Billiton decides to leave his seat to PetroChina, no doubt that the Shell FLNG solution should be more competitive.
