Companies affected by the cancellation of the project in Western Australia could include Ausgroup, Civimec and possible Ezion...
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$45b Browse gas hub dead
Andrew Probyn, Peter Kerr, Gareth Parker, Peter Klinger, Dan Emerson and AAP, The West Australian
Updated April 12, 2013, 9:50 am
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Woodside chief executive Peter Coleman. Picture: Nic Ellis/The West Australian
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Woodside says it is confident the Browse gas project will go ahead, despite the energy giant scrapping plans for the controversial onshore processing plant at James Price Point.
Woodside announced today that it had dumped plans for the controversial $45 billion project.
Chief executive officer Peter Coleman said the decision to dump the plan for James Price Point was tough, saying the project was subject to cost pressures.
"We do believe that Browse will get developed,” he said.
He would not be drawn on the cost estimate of the James Price Point development but said Woodside had tried everything to significantly reduce the budget, including reducing the size of the proposed LNG trains, in an effort to enhance the economics.
In the end the costs had not come down sufficiently for the Browse project to be viable.
Mr Coleman said the feedback from Premier Colin Barnett, who was informed last night, and Federal Resources Minister Gary Gray was supportive.
Mr Coleman said it was too early to discuss specifics around other development options for the Browse gas, and he declined to give his preference.
He said the hype sparked by environmental protesters had not been a factor in Woodside's decison, which was based solely on economic reasons.
In an announcement to the ASX this morning, Woodside said it would review alternative ideas with its joint venture partners.
Woodside said James Price Point "does not meet the company's commercial requirements for a positive investment decision".
It leaves the future of what was going to be one of Australia's biggest-ever resources projects in limbo.
Woodside said a major review of the proposed LNG processing plant, near Broome, had found it would not deliver the returns the company needed.
"Woodside will immediately engage with the Browse joint venture to recommend evaluation of other development concepts to commercialise the Browse resources, which could include floating technologies, a pipeline to existing LNG facilities in the Pilbara or a smaller onshore option at the proposed Browse LNG precinct near James Price Point,” the statement said.
In a media conference in Perth, Mr Coleman said that Woodside had been looking at other options to a processing plant at James Price Point, but that they were nearly as mature as the original plan for the onshore facility.
However some of the alternatives that would be considered did have the potential for the early development of Browse.
"We've already come out and said things like floating technology, for example, is a technology that Woodside supports ... whether that's appropriate for a Browse development will need to be determined by the joint venture over time,” Mr Coleman said.
Shell's Australian boss Ann Pickard reiterated that it believed its floating technology would be the fastest, most economic and best technical solution for processing gas from the Browse project.
"Floating LNG can bring significant long-term, sustainable jobs to Western Australia, Australia, and the Kimberley, as well as providing employment and business opportunities for Kimberley indigenous people,” Ms Pickard said in a statement.
Ms Pickard said Shell would work closely with the Browse joint venture and government to keep the Browse project on track.
Premier Colin Barnett says the failure to develop a gas hub project at James Price Point is a tragedy and a missed opportunity.
A fierce opponent of a floating offshore plant, Mr Barnett said that if the project went ahead in such a form it would still bring some benefits to WA.
WA Opposition Leader Mark McGowan said the Premier's constant interfering and meddling caused the James Price Point project to be lost.
Mr McGowan said WA Labor has always said that the gas should be processed onshore first and foremost.
“We do not support offshore processing of Western Australian gas,” Mr McGowan said.
“Mr Barnett should have insisted the gas be processed onshore but should never have interfered in the commercial arrangements or the exact siting of the project onshore.
“The Premier has no one to blame but himself. His handling of the James Price Point issue has been abysmal right from the beginning."
Prime Minister Julia Gillard insists the investment phase of Australia's resources boom is yet to peak despite the Woodside decision.
Ms Gillard says the company's decision to shelve the massive project does not relate to Federal or state regulatory issues.
“It's an issue for the company, so it's for them to deal with,“ she said.
Ms Gillard said the resources boom would be at work in the economy for a long time to come.
“We haven't seen the peak of the investment phase into resources yet and we are yet to see the peak of the production phase,” she said.
Shareholders have applauded Woodside's decision, sending its stock soaring. The stock was $1.21, or 3.4 per cent, higher at $36.49 at 9am.
Police escort Woodside vehicles as they enter the James Price Point site. Picture: Kim Kirkman
Green groups welcomed the Woodside announcement and said it was a win for the Kimberley.
“There were always less environmental and socially destructive options yet governments of both persuasions – spearheaded by Liberal Premier Colin Barnett and Labor’s former federal resources minister Martin Ferguson ‑ tried to force this unwanted and unnecessary development on the Broome and Kimberley communities," Wilderness Society National Director Lyndon Schneiders said this morning.
“This development was opposed by people all around Australia and the world, but nowhere stronger than by the brave Broome community who stood up to hundreds of police alongside the Traditional Custodians who wanted to treasure their cultural heritage,” he said.
“It’s time for the Western Australian Government to look seriously at sustainable economic development for the Kimberley.”
The Aboriginal representative group set up to handle the future benefits arising from the project said it was disappointed by the decision.
Waardi Limited chairman Warren Greatorex said: “We are obviously disappointed in terms of the benefits that could have flowed to the Traditional Owners and local community.
“Waardi is still a party to the Browse LNG Precinct Project Agreement and as such we will continue to work with other parties to the agreement and stakeholders on the future position from here.
“We have always worked in the best interests of the Traditional Owners and local community and we will continue to do so.”
Waardi was ratified under the agreement last year as the administration body for the Goolarabooloo Jabirr Jabirr Native Title Claim Group.
Australian Manufacturing Workers' Union WA secretary Steve McCartney lamented the loss of the project, saying it could have employed thousands of Australian construction workers and filled local manufacturing yards for years.
Mr McCartney criticised speculation of a floating facility to process the gas, describing it as a disastrous option.
“We will lose 8000 construction jobs and have them replaced with a few hundred operational jobs,” he said.
“The biggest winners from this decision will be steel fabricators in South Korea and China, as local fabricators will not get a look in to build the facility.”
Mr McCartney said all levels of government should work to ensure onshore processing was a priority.
“We must not allow local jobs to float away,” he said.
Federal Resources Minister Gary Gray, a former Woodside executive, said Browse gas could still be developed to the benefit of WA, Australia and the Kimberley.
"What we have seen in the past past 24 hours is Woodside and the joint venturers making clear their preferred options because James Price Point is too expensive," Mr Gray.
He said Woodside and the joint venturers genuinely wanted to invest in and develop the Browse oil and gas field.
Woodside received conditional planning approval from the WA Government last week to build a $120 million camp to house more than 850 fly-in, fly-out workers at the proposed gas hub.
The company recently said it was sticking to its June schedule for a final decision on building the onshore processing plant.
But analysts believe the proposal was not economically viable because of spiralling costs and challenges securing labour.
The Anglo-Dutch petroleum giant has in recent weeks been agitating for the gas field to be developed with its cutting-edge floating liquefied natural gas vessels in a bid to offset WA's spiralling construction costs.
Mr Barnett has mounted an isolated campaign against the FLNG tankers, arguing that only a land-based solution at James Price Point would deliver the right mix of jobs and economic development to the State.
Musician John Butler was among the high-profile opponents. Picture: Lee Griffth/The West Australian
Others, including Mr Gray, argue that FLNG could be an opportunity for Australia to form a high-tech jobs and skills base. Mr Barnett told parliamentary question time yesterday that the joint venture partners had until the end of June to make a final investment decision.
"I have continuous discussion with Woodside and it's not for me to comment publicly, particularly to market sensitive information on what decisions might be," he said.
Asked by Opposition Leader Mark McGowan yesterday if he had received advice in the past week from the joint venture partners that the project would not proceed, Mr Barnett said: "I have not received advice to that effect from the joint venture partners at all. At all."
Senior sources yesterday told The West Australian that the WA Government and Canberra had been informed by Woodside of its impending announcement.
James Price Point has been fiercely opposed by conservationists and is yet to be given environmental approval by the Federal Government. One of the sources said Woodside's decision was not the end of the environmental approvals process but "if the Browse Basin is to be developed, then the joint venture partners will have to use FLNG".
It is not clear how the development would affect the up to $1.5 billion indigenous social benefits and jobs package that was contingent on the land-based site proceeding.
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