Woodside Exits Sempra's Port Arthur LNG on Low Returns Outlook

(Bloomberg) -- Woodside Petroleum Ltd. is walking away from Sempra Energy’s Port Arthur LNG gas export development in Texas about three years after joining the project, citing lower expected returns than would justify its investment.

“We’ve informed Sempra that we’re not going to participate in Port Arthur,” Woodside Chief Executive Officer Peter Coleman said in an interview Thursday. “It got to a point where it got below our investment returns and we said we need to put our money somewhere else.”

For Sempra, the decision to exit is probably not surprising. Chief Operating Officer Joseph Householder told analysts late last month during a call that Woodside was unlikely to invest in Port Arthur after Coleman questioned the economics of the project. The export facility, with direct access to the Gulf of Mexico, has been slated to start in 2023. San Diego-based Sempra didn’t immediately respond to requests for comment outside normal business hours.

Woodside’s focus remains on unlocking the vast gas resources offshore Western Australia, including the $20.5 billion Browse project. Its partners in the existing North West Shelf LNG export terminal agreed to terms for processing third-party gas, which opens the possibility to process supplies from Browse, after concluding about 18 months of negotiations, Coleman said.

NWS Future

“It means that the North West Shelf can now see a future post the cessation of the equity gas that’s going through there,” Coleman said. “It can see itself with a now 30-plus year future, where it will be processing more and more third party gas.”

A preliminary tolling agreement is expected between the NWS participants and the Browse joint venture during the third quarter of this year, Woodside said in its second-quarter report Thursday. Perth-based Woodside is the operator of both the NWS LNG export terminal and the Browse project.

The North West Shelf is Australia’s oldest operating LNG terminal and has six partners, including BP Plc, Chevron Corp. and BHP Billiton Ltd. The project participants have overcome opposition from one member, which Coleman said in April was not aligned on the tolling deal. Browse gas will need to be piped about 1,000 kilometers (621 miles) south to be processed at the plant.

The company on Thursday also reported revenues in the second quarter of $1.08 billion, compared with about $868 million a year ago. Shares were down 0.7 percent at A$34.255 as of 2:53 p.m. Sydney, compared with 0.5 percent gain in the benchmark S&P/ASX 200 Index.

To contact the reporter on this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng

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