Australia’s Woodside not cutting LNG output

Australian independent Woodside Petroleum said there are no plans to cut LNG production in response to weaker gas demand because of the impact of the Covid-19 pandemic on economic activity and energy demand.

Around 80pc of Woodside’s output from the three Australian LNG plants it is involved in is sold through a mixture of medium and long-term contracts, with the remaining 20pc exposed to the spot market. The contracts do not include scope to cut supplies without incurring penalties, Woodside chief executive Peter Coleman said today. “We will not be cutting production,” he said.

Woodside is the operator of the 16.3mn t/yr North West Shelf (NWS) LNG and the 4.3mn t/yr Pluto LNG and has a 13pc stake in the Chevron-operated 8.9mn t/yr Wheatstone LNG, all offshore Western Australia (WA).

Woodside also has an agreement to acquire 846,000 t/yr from the second production train at the Corpus Christi LNG export terminal in Texas, which is operated by US LNG firm Cheniere Energy.

“I can’t comment on what we are doing in the US,” Coleman said.

Some LNG producers have announced production cuts. Shell said this week that expects to reduce LNG production by 8-17pc in the April-June quarter as global LNG demand slows because of the Covid-19 outbreak.

Woodside largely agreed with the IEA forecast this week that global gas demand could fall by 5pc this year if lockdowns persists. “There are a range of scenarios we are looking at that relate to gas demand and that view is within that range,” Coleman said.

Woodside’s share of LNG production rose in the January-March quarter from a year earlier with NWS LNG operating near full capacity and Pluto operating above nameplate capacity.

The collapse in the oil price prompted Woodside to defer plans to develop the Scarborough gas field in the Carnarvon basin offshore WA to provide feedstock for a second Pluto train. It also deferred the development of the Browse backfill gas project to provide feedstock for NWS LNG.

“It will be hard to keep the North West Shelf full in the not so distant future unless there is some agreement to provide backfill gas,” Coleman said. But Woodside has no intention of moving from its deferred project timeline, he said.

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