April 4, 2017 / 11:22 AM / 4 months ago

Woodside considers fixed-priced LNG sales as market evolves

3 Min Read

CHIBA, Japan, April 4 (Reuters) - Woodside Petroleum is considering sales of some of its liquefied natural gas (LNG) on a fixed-price basis, the chief executive of Australia's largest independent oil and gas producer told reporters on Tuesday at a conference in Japan.

LNG supply contracts need to evolve by diversifying their pricing basis, particularly for new entrants into the market, said Peter Coleman at a Gastech press briefing.

"We've talked about a lot of innovation in our business models but the reality is that the way we contract hasn't changed very much at all," he said, adding that most supply contracts were still linked to oil prices.

Woodside has been considering the fixed-price structure, especially for buyers in developing markets as it gives these new participants surety of supply and price, Coleman said.

"It is something we are looking at for parts of our portfolio," he said. Coleman said he would be comfortable having between 20 and 30 percent of Woodside's LNG portfolio being sold on a fixed-price basis, but with shorter contract periods to mitigate risk.

The need for more diversity in LNG pricing comes amid an overall push for contract flexibility in the industry.

Last month, the biggest buyers in the world's top three LNG consuming countries - Japan, South Korea and China - clubbed together to push for more flexible supply contracts that drop cargo destination clauses.

Other producers are also toying with the idea of fixed pricing in supply contracts.

Tellurian Inc Chairman Charif Souki on Tuesday said at the gas conference that his firm could guarantee deliveries of the supercooled fuel to Japan for $8 per million British thermal units all inclusive from 2023.

The cargoes that would come from its planned Driftwood terminal in Louisiana would be sold under five-year contracts.

Browse Project in Progress

Woodside and its partners are expecting to reach a decision on how to develop their Browse LNG project within the next two years, Coleman also said.

"We are looking for decisions on Browse before 2020, (and) we are targeting to get Browse flowing into the North West Shelf around 2025," he added.

Woodside is planning to use its liquefaction capacity at the North West Shelf project to bring the gas to market.

"The Browse concept at the moment, if it goes through the North West Shelf, is now just simply an offshore development with a long pipeline ... All the infrastructure, the big expensive part of it, is already there. It is de-risked," Coleman said. (Reporting by Mark Tay; Editing by Tom Hogue)

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