Woodside boss makes blunder with East Timor LNG comments

The chief government of Australia’s Woodside Vitality (ASX:WDS) seems to have made a blunder together with her feedback that the corporate is open to revisiting a greenfield LNG export improvement in East Timor. Considerably, the melodrama across the venture will doubtless proceed.

Though seemingly politically right, her feedback might have inadvertently stalled progress being made in Dili, the place the nation’s management have been reportedly reconsidering the advantages of utilizing present infrastructure in Australia to course of gasoline from Better Dawn.

Woodside has been adamant for over 10 years that piping gasoline from the undeveloped Better Dawn fields to a greenfield liquefied pure gasoline (LNG) export terminal onshore East Timor can be technically difficult and commercially unacceptable. About 70% of Better Dawn – consisting of the Dawn and Troubadour fields – lies in East Timor’s seabed following a 2018 maritime boundary cope with Australia.

Nonetheless, at an investor briefing on Thursday, Meg O’Neill, who was appointed everlasting CEO of Woodside in August 2021, made a big about-turn on the corporate’s place in direction of Dawn improvement.

Woodside had beforehand insisted that solely onshore processing of Dawn gasoline in Darwin, northern Australia, can be acceptable, highlighting business causes and technical danger of laying pipelines over the deep-sea Timor Trench.

Nonetheless, she mentioned Woodside now recognised the significance of an onshore improvement in East Timor for that nation and due to this fact Woodside had reopened talks round potential improvement ideas for Dawn in East Timor, also called Timor Leste.

It appears O’Neill has been nudged in direction of political correctness, maybe by the Australian Labor authorities, which received energy in Might, and that has a traditionally sturdy relationship with East Timor’s management and highly effective elite.

Certainly, since Labor’s victory, the rhetoric over the stalled Dawn improvement has warmed up. In October, Australia appointed former Victoria state premier Steve Bracks as its particular consultant for the Better Dawn gasoline venture in East Timor as each international locations search to interrupt a stalemate over easy methods to develop the gasoline fields, reported Reuters.

“Bracks will symbolize the Australian Authorities and seek the advice of with the Authorities of Timor-Leste and different key stakeholders, together with the Dawn Joint Enterprise,” Overseas Minister Penny Wong mentioned in an announcement.

Bracks has deep information of East Timor and shut relationship with its folks and leaders due to his shut engagement over a few years, Wong mentioned.

Certainly, Bracks has a really cozy relationship with The Timorese management, notably Xanana Gusmao, the nation’s de-facto chief.

Now, Woodside is publicly making a big about flip. Though, sarcastically, simply because the highly effective figures in East Timor’s corridors of energy had been covertly reconsidering the advantages of pivoting in direction of permitting Woodside to pipe the gasoline to present LNG vegetation in Darwin for processing.

O’Neill’s feedback will certainly be seen as a glimmer of assist by East Timor’s proponents for a large-scale greenfield improvement on its shores earlier than parliamentary elections subsequent yr.

Over the previous decade or so, East Timor’s leaders have doggedly insisted that Better Dawn needs to be developed on their house soil. The Dawn venture was the centrepiece of East Timor’s strategic improvement plan formulated in 2011.

On a go to to Australia in September, East Timor’s President Jose Ramos-Horta urged Canberra to again the pipeline to East Timor and flagged that Indonesia, South Korea, Japan, and China may turn into potential buyers in Better Dawn.

As Reuters famous, the venture is essential to Timor’s future as its principal income – the Bayu Undan oil and gasoline subject – will cease producing this yr, leaving the nation nearly wholly depending on its petroleum fund.

With little or no oil income coming in, excessive withdrawal ranges, and a dismal worldwide monetary market, the stability of the fund dropped to $16.9 billion on the finish of October, down from $19.7 billion in the beginning of 2022. At this fee, even with out taking out extra to spend money on Dawn, the fund might be empty inside a decade, evaluation from unbiased thinktank La’o Hamutuk reveals. The federal government realises that the nation is shifting towards a “fiscal cliff”, however the 2023 funds simply accredited by parliament continues and anticipates spending at more and more foolhardy ranges, in keeping with Dili-based La’o Hamutuk’s newest submission to parliament.

If any greenfield improvement in East Timor had been ever to proceed, it’s not clear how the Timorese nationwide oil firm TimorGAP, would fund its share of the venture. Woodside has a 33.44% stake in Better Dawn. Timor GAP holds 56.56% after shopping for out Shell and ConocoPhillips in 2018. Japan’s Osaka Gasoline holds the stability of 10%.

Conservative estimates counsel TimorGAP would wish to stump up $10 billion for the event of Dawn in East Timor. The nation can be spending $10 billion earlier than even seeing a greenback come again.

There are technical dangers too. The fields are solely about 150 km south of Timor Leste’s shoreline however in between lies the three,300 metre-deep Timor Trench, which creates vital challenges for laying pipelines.

Peter Strachan, a Perth-based unbiased power analyst, advised Vitality Voice “I assume that if Timor Leste wished to stump up the money to construct and personal the LNG plant on shore and gasoline transport services, then Woodside can be eager to promote the gasoline as a service provider provider into their services. On this approach, Woodside wouldn’t have any belongings in East Timor and if all of it fell over, Woodside would nonetheless have its fairness within the developed Dawn fields and will commercialise the gasoline in one other approach.”

Certainly, Woodside as an skilled LNG developer, would mitigate danger as a lot as potential as they matured any East Timor venture. Trade self-discipline is so sturdy in the meanwhile that they’d not sanction something they weren’t comfy with.

The irony is that Better Dawn gasoline may have simply already been despatched to backfill an present LNG plant in Darwin. Crucially, findings from a UN-backed Conciliation Fee in 2018 confirmed that improvement of Better Dawn oil and gasoline in East Timor was unviable, opposite to what East Timor’s authorities claimed on the time.

Conversely, the evaluation discovered that sending Better Dawn gasoline to Darwin for processing was commercially enticing for each East Timor and the buyers.

However this was to not be. Since then, in 2018, Better Dawn has moved no nearer to improvement. There haven’t even been any phrases agreed for a production-sharing contract (PSC), which is an important requirement for any venture to proceed. Sadly, it appears Dawn will stay an everlasting lengthy shot.

As all the time with East Timor, there’s heaps happening behind the scenes, involving a lot of totally different stakeholders. With the arrival of the Labor authorities in Australia, the appointment of Steve Bracks as a key center man, and Woodside’s U-turn commentary, it appears the Dawn saga enters a brand new chapter with extra melodrama to be anticipated. A state of affairs the Timorese are good at exploiting. However whether or not that may end in Dawn, found in 1974, ever being developed stays to be seen. The clock is ticking. Tick tock. Tick tock.