BEN HARVEY: Many questions still unanswered on the | Australian Markets
Woodside Energy boss Meg O’Neill has a fuel downside.
The entire of Australia is about discover out how offensive it’s.
It’s not that O’Neill has an excessive amount of fuel. And this isn’t an embarrassing “I hope nobody gets in this lift” variety of dilemma.
It’s far more severe.
The six-year course of of extending the life of the sprawling North West Shelf fuel project nearly broke everybody concerned: Woodside, the environmentalists who fretted the carbon footprint, the Aboriginal activists who noticed historical rock artwork imperilled and the authorities bureaucrats who did the coverage due diligence.
It ended with State and Federal politicians having to make a Sophie’s Choice between climate motion and defending Indigenous tradition on the one hand and financial actuality on the different.
Everyone concerned will need a cup of tea and a lie down when Woodside lastly responds to the Federal Government’s calls for and a deal is inked to keep the facility going till 2070.
Don’t escape the Twinings simply but, for this isn’t the finish.
It’s not, to parrot Winston Churchill, even the starting of the finish. At best, it’s the finish of the starting.
The massive query now could be, the place will the fuel come from? How does Woodside feed a beast which, at one level, was the largest engineering project in the world?
The fields that presently maintain the NWS will keep the place buzzing till the late 2030s, albeit at ever-declining charges.
Woodside may have the ability to squeeze a few more years by tapping some neighbouring reservoirs over which it has rights however 2040 goes to be fairly close to a laborious stop.
What then?
Browse, proper?
Most analysts agree that Australia’s largest undeveloped useful resource will finally be developed (will probably be a long time coming when it’s; it was found in 1967) however there’s no guarantee it is going to feed the NWS.
Respected vitality analyst Saul Kavonic has for years argued that it’s far more logical for Browse fuel to be integrated into the neighbouring Ichthys project run by Japanese vitality giant INPEX.
That would see the fuel processed at INPEX’s still-newish and really environment friendly LNG plant in Darwin. Kavonic says this could be an “elegant solution” to the Browse conundrum.
On paper it is sensible. The Ichthys discipline is 150 km from Browse — a long straw to blow by however a fraction of the 900km needed to attach Browse to the NWS.
To put 900km in perspective, it’s 10km longer than the underwater tube that connects INPEX’s belongings off the Kimberley coast to Darwin — and that pipe set a world report when it was accomplished.
The competing prices of totally different pipeline routes isn’t the solely factor that Woodside should take into account. Browse has a sasquatch-sized ’s carbon footprint.
Woodside would need to plant one other Amazon rain forest to offset the emissions so the carbon will need to be sequestered.
That technology is still hit or miss so you possibly can guess London-to-a-brick that the company will put its handout for a taxpayer subsidy.
We may see a bidding struggle between the Northern Territory and WA governments.
Come to us and we are going to financially de-risk the sequestration course of, the NT will say. We’ll JV it with you and inform the punters we’re pioneering new climate-saving technology.
Have we obtained a deal for you, the politicians in Perth will plead. Come to WA and we’ll fast monitor all the things. We’ll give it main project standing and bypass each inch of purple tape. We’ll set fire to the Department of the Environment if we have now to!
If the economics are overwhelmingly in favour of Darwin Woodside wants a plan B for the NWS. Plan B may very well be acreage over which Chevron has choices and which Woodside has been eyeing off for some time.
That’s attention-grabbing as a result of proper now the Federal Government is toughening up its use-it-or-lose provisions.
Kavonic thinks at the very least it will give O’Neill the alternative to stress Chevron into supplying the NWS. The nuclear option would see the Feds strip Chevron of the fields it’s been banking.
Either eventuality could be dangerous news for Chevron, which wants these fields to backfill its Gorgon and Wheatstone processing amenities in the 2040s and 2050s.
The supermajor must rinse each final greenback from its $100 billion investment in these plants, so the bosses in California received’t go down with out a battle.
And, as anybody who has watched Landman is aware of, the solely creature more ferocious than an American oil government is an American oil government’s lawyer.
If poaching Chevron’s belongings isn’t attainable then Woodside has solely two playing cards to play, one offshore and one on.
The Equus fuel discipline, in waters 200km north of the Wheatstone project, appears a excellent answer. In 2022, Woodside struck a non-binding deal with proprietor Western Gas to provide and export three million tonnes of Equus fuel as LNG by the NWS.
The non-binding half is the most important take-out from that deal as a result of the economics of Equus make no sense to even the most bullish fuel price forecaster.
The contract might as effectively have had the working title “In case of emergency break glass”.
The final option is the Perth Basin, the place all roads result in billionaires.
The Ryan Stokes-controlled Waitsia project is already exporting fuel by a swap deal with Woodside. It is about to instantly feed the NWS however underneath coverage settings designed to shore up home provide is simply allowed to faucet worldwide markets till 2030.
The Cook Government might need to increase that deadline with regards to realise that home fuel is a facet hustle to the profitable LNG trade however to date 2030 is set in stone.
The relaxation of the Perth basin is a wholly owned subsidiary of Gina Inc.
Rinehart has sprawling belongings in the area however, to date, has proven little urge for food to develop them.
Even if she did drill a few wells, it’s unlikely she may construct a processing plant earlier than 2030 and pipe the fuel to the NWS for export.
Rinehart may keep away from the deadline crunch by putting a tolling deal with Waitsia however there’s each probability she would flip her nostril up at that option when she compares margins with the dizzyingly profitable Roy Hill iron ore mine.
Put all that in a blender and you’ve got an financial, political, environmental and social smoothie that can play havoc with Meg O’Neill’s guts.
And given fuel is crucial to this nation’s prosperity, we may all get indigestion.
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