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Woodside Petroleum has just announced that it is cancelling its $45 billion liquefied natural gas (LNG) project in Australia after it has decided that it no longer makes an economic sense. It is likely to consider an offshore floating LNG plant as a cheaper alternative.
Analysts at Macquarie have stated that “this decision will surprise few as the proposed onshore development always looked too economically, technically, environmentally and socially risky for too little reward.”
Developing LNG projects in Australia have started to face problems in recent years as costs have begun to escalate, and the shale boom in North America has produced far cheaper options elsewhere in the world. Australia is set to overtake the Qatar as the world’s largest exporter of LNG. Firms from around the world have invested over $140 billion in six new LNG plants over the last two and a half years, however it looks as though the future may rely on floating LNG plants rather than traditional onshore facilities, especially as this decision by Woodside may likely end all investor interest in onshore gas projects.
Related article: Australia Looks to Raise LNG Production by Nearly 30 Percent
JP Morgan estimates that a floating LNG project, similar to Shell’s floating LNG barge off the west coast of Australia, will help Woodside save 20%, reducing capital expenditure from around $44.6 billion for an onshore project, to $35.5 billion.
Woodside has also started to show more interest in North America, enquiring about the possibility of an LNG project in Canada.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com