Offshore Technology

Daily Newsletter

09 August 2023

Daily Newsletter

Woodside to divest 10% stake in Australian gas project to LNG Japan

From the deal’s effective date, LNG JAPAN will also compensate Woodside for its share of expenses related to the gas project.

Woodside Energy has signed an agreement to sell a 10% participating interest in Scarborough gas project in Australia to LNG Japan’s wholly owned subsidiary, LJ Scarborough, for $500m (A$770m) (Y71.5bn).

LNG Japan is 50/50 joint venture (JV) between Sumitomo and Sojitz.

From the transaction’s effective date, which is 01 January 2022, LNG Japan will repay Woodside for its portion of spending for the Scarborough project.

The total consideration of the transaction comprising the purchase price, reimbursed expenditure and any escalation is estimated at about $880m.

Subject to relevant Australian and Western Australian government approvals, the transaction is planned for completion in the first quarter of 2024.

Upon completion of the deal, Woodside will hold a 90% interest in the Scarborough JV and continue to serve as its operator.

The Scarborough JV comprises the Scarborough field and related offshore and subsea infrastructure.

The gas field is located approximately 375 km off the coast of Western Australia.

The Scarborough gas project entails installation of a floating production unit, featuring eight wells that are planned to be drilled during the initial phase. An additional 13 wells will be drilled over the lifespan of the field.

Furthermore, Woodside has signed non-binding heads of agreement with LNG Japan whereby the latter will receive 12 LNG cargoes annually, equivalent to about 0.9 million tonnes per annum over a period of ten years. This will be effective from 2026.

LNG Japan CEO Kyo Onojima said: “We are very pleased to join the Scarborough Joint Venture and are looking forward to finalising the LNG offtake agreement and exploring business opportunities in the new energy sector.”

Woodside CEO Meg O’Neill said: “The support of LNG Japan is testament to the quality of the Scarborough project. It also underscores the ongoing demand from Japanese buyers for new supplies of gas and the role of gas in supporting Japan’s energy security.”

Woodside has also signed non-binding agreements with Sumitomo and Sojitz to collaborate on exploring prospects in emerging energy sectors. These could include hydrogen, ammonia, carbon capture and storage, and carbon management technology.

ESG 2.0 marks a shift towards stricter environmental rules

ESG is moving into a different era, which we call ESG 2.0. While ESG 1.0 was driven by voluntary corporate action, spurred by pressure from activist consumers and investors, ESG 2.0 is being driven by a new wave of government policies. The EU has taken the regulatory lead, with rules introduced or in the pipeline that will price emissions, regulate the use of the terms ‘ESG’ and ‘sustainability’ in marketing materials, and make ESG reporting mandatory. The US has taken a different approach, favoring less regulation and more financial support in the form of tax breaks for clean industry (renewables plus nuclear and hydrogen). China is planning to expand its emissions trading system to more sectors, decarbonize its heavy industry, and ramp up its use of renewables. The new policy direction is mainly motivated by the ambition to hit net zero emissions targets. But on top of this, governments are now competing for clean industry and trying to challenge China’s leadership on the production of the world’s green technologies such as solar panels and batteries, as well as the production and refinement of materials needed for energy transition such as lithium. These driving forces are leading to policy that will impact every sector, not just heavy industry, and will keep ESG near the top of the regulatory agenda over the longer term.