Australian energy giant Woodside Energy—which is adding a U.S. LNG export development to its global portfolio of assets in Mexico, Senegal, and Trinidad and Tobago—isn’t looking to build a U.S. onshore upstream position, CEO Meg O’Neill said
during a webinar with Enverus.
Woodside batted away suggestions of any potential urgency for an upstream position. Instead, the company plans to secure its gas supplies through partnerships, O’Neill said Sept. 25 during the Morning Energy Live Enverus broadcast.
“One of the things we recognize is that the onshore shale business is quite different from LNG plants. It’s a different capability set, a different risk mindset. So, we’ll be really thoughtful about how we partner with the upstream players,” O’Neill said.
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Many U.S. onshore players want to get their gas molecules to Europe and Asia, O’Neill said. In those markets, customers are willing to pay $10/MMBtu or more compared to the low single-digit gas prices in the U.S.
“So, I think there's a real win-win solution space for us: an onshore player who's got that strategic mindset; an LNG buyer who again has that strategic mindset; and then get a bit of infrastructure support as well,” O’Neill said.
Woodside pulled the trigger in July on a deal to acquire Tellurian Inc., which was struggling to develop its 27-million tonnes per annum Driftwood LNG project. Woodside agreed to pay $900 million, or a cash offer of $1 per share for Tellurian. The implied enterprise value of the deal is $1.2 billion.
Woodside expects to take an initial final investment decision on Driftwood sometime during the first part of 2025, O’Neill said last week during a press conference at Gastech, responding to a question from Hart Energy.
The Driftwood site covers 880 acres and civil work is well advanced, according to O’Neill.
In mid-September, O’Neill told Hart Energy that Woodside is planning on keeping at least 50% interest in Driftwood and looking for different partners to join in what she called “the dream team.”
Woodside is weighing four types of partners: U.S. upstream E&Ps that want to get some of their product exposed to international pricing; strategic LNG players interested in building out their position via Driftwood; infrastructure players; and U.S. companies specializing in pipeline to get “products from Point A to Point B.”
The company has the capital to fund Driftwood, O’Neill said, but “we don't necessarily want to tie up all of our capital. So, there's those categories of potential investors that we're going to look to bring into the Driftwood project.”
Bullish on LNG
The people who are “gloomy and doomy about LNG” are the same people who said the same thing 10 years ago before the first wave of U.S. LNG started flowing, she said.
The global LNG market has grown 50% during the past decade. Woodside forecasts it will grow another 60% over the coming decade, O’Neill said.
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“What we see is continued buyer appetite,” O’Neill said. “We have buyers in these critical Asian economies making these long-term commitments to liquified natural gas. You see the same buying pattern in China.”
Woodside has long-term contracts with Korea’s KOGAS, Japan’s JERA and China’s CPC, bullish signs for the company’s LNG future, she said.
“We know there are other buyers that are a little bit more price sensitive and you see their buying patterns rise and fall as the commodity price rises and falls,” she said. “So again, as more supply comes in, you'll see some of those buyers be very opportunistic about taking additional LNG if the prices soft for a short period of time.”
But Woodside doesn’t “subscribe to the glut thesis” even as alternative energy sources continue to develop, she said in response to analysts saying LNG is overbuilt.
As the energy transition continues to take shape, O’Neill said the starting point has one name: coal.
“If the world is serious about tackling climate change and decarbonizing, the starting point needs to be coal and the global LNG market today represents about 12% of the global coal utilization,” she said.
Switching from coal to gas is the fastest way to bring down emissions, O’Neill said.
“We do expect renewable build out to continue. We do expect nuclear investment to continue, but we also expect gas to continue to play that important role in the energy transition,” O’Neill said.
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