The decision by the energy giant Woodside to shelve its Browse floating LNG project off Western Australia is a fresh blow to the Federal Government as it battles to plug budget revenue holes from a fast fading resources boom.
- Woodside has indefinitely suspended its $40b Browse LNG project
- Resources Minister Frydenberg “disappointed” but understands “it’s a very challenging energy environment”
- Australia set for nearly $50b a year in export earnings from LNG by 2020
Woodside has put the $40 billion joint venture with Royal Dutch Shell, BP and PetrolChina on hold indefinitely as record low oil and gas prices make projects like Browse unviable.
Woodside was unable to justify development costs that could exceed $40 billion, joining other global energy giants is decommissioning projects because of the commodities rout.
The US benchmark West Texas Intermediate crude price was $US38.18 a barrel this morning, well below the project’s breakeven range of $US50-60 a barrel.
The cautious move by Woodside is the latest evidence that the carnage caused by falling commodity prices is exacerbating the end of the boom in resources investment.
Resources Minister Josh Frydenberg said the decision is understandable but disappointing.
“We are disappointed by this decision from Woodside and its joint venture partners to delay the development of the $40 billion plus Browse project,” he told the ABC’s AM program.
“But we understand it’s at a time when it’s a very challenging energy environment and we’ve seen dramatic reductions in the price of oil and gas.
“We also note that Woodside and its joint venture partners have not walked away from the project. They’re still committed to its development in due course. As a government we’ll do everything we can to ensure that happens.”
Woodside’s decision means revenue from corporate tax receipts for future budgets is set to evaporate at a time when the government is trying to plug budget holes.
Australia to become ‘world’s largest’ LNG exporter
However, Mr Frydenberg remains confident that the investment pipeline will improve once commodity prices eventually recover.
“We’ll continue to increase our export earnings in energy, particularly because we’ve now seen major LNG projects start to come online,” Mr Frydenberg argued.
Analysis: Browse Basin down the sink
Woodside Petroleum’s decision to shelve the $40 billion floating LNG project in the Browse Basin comes as no surprise, writes Stephen Letts.
“Just the other week I was at the Gorgon Project, off the coast of Western Australia on Barrow Island, which is Australia’s largest ever private sector investment.
“Its first shipment has now sailed for Asia and it will be part of an LNG story which will see Australia become the world’s largest exporter, overtaking Qatar by 2020, and that will see some $49 billion a year of export earnings from LNG for Australia by 2020, which is a tripling of where we are currently.”
However, Mr Frydenberg was managing expectations on the pace of any oil price recovery.
“I don’t think we’ll be back to $US140 barrels of oil anytime soon, but you will see the price go up and down from here on,” he said.
“But I’m very, very upbeat about the future prospects for resources and energy in Australia largely because we’re so innovative.
“The technology and the innovation and the engineering capabilities that Australia has brought to bear will stand us very well into the future.”