Woodside’s ‘crown jewel’ Scarborough gas lures buyers to fill Russia gap

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MELBOURNE (Reuters) – Woodside (OTC:WOPEY) Petroleum has received strong interest from companies for a stake in the Scarborough natural gas project it is developing off Western Australia in the wake of the Ukraine conflict, Chief Executive Meg O’Neill said on Friday.

Woodside is set to become 100% owner of the $5.7 billion Scarborough project following its merger with BHP Group (NYSE:BHP)’s petroleum arm, approved by Woodside investors on Thursday.

Australia’s largest independent gas producer has long flagged it wanted to sell down its interest, but has been waiting to acquire BHP’s stake to be able to provide certainty on the size of its sell-down.

“Scarborough is going to be a crown jewel for Woodside. What’s important for us is finding the right partner at the right price,” O’Neill told Reuters, adding there could be more than one partner.

Woodside wants to maintain a majority stake, but has not specified what percentage.

“We have had strong interest post-Ukraine, as many customers around the world realise the importance of energy security,” O’Neill said, adding that there was interest in both LNG supply and an equity stake in the project.

Following Russia’s invasion of Ukraine, sanctions have resulted in an indefinite delay to the 20 million tonnes a year Arctic LNG 2 project. LNG buyers and investors are now seeking alternatives.

“They look at Scarborough as a project … that will be producing in the second-half of the 2020s, filling a gap that is expected to arise in the market at that point in time,” O’Neill said.

Scarborough gas will feed Woodside’s $6.3 billion Pluto LNG expansion. Its first cargo is expected in 2026.

LNG projects typically seal long-term sales before a final investment decision, but Woodside lined up contracts for only about half its volumes ahead of the Scarborough/Pluto go-ahead last November, positioning it to take advantage of a jump in prices, Wood Mackenzie analyst Dan Toleman said.

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