SYDNEY (Dow Jones)
Woodside Petroleum Ltd. (WPL.AU) has slowed progress on an expansion of its flagship Pluto gas-export project as it searches for more gas, potentially assisting rival developments vying to supply Asia with cleaner-burning fuels.
Australia's biggest pure-play oil company also announced Tuesday its second-quarter revenue jumped 17% to US$1.25 billion after unrest in the Middle East and North Africa helped drive oil prices above US$100 a barrel.
Woodside is betting billions of dollars on projects like Pluto that could transform the company into a major gas exporter in the Asia-Pacific region.
Australia's vast gas reserves and stable political climate have lured the likes of Royal Dutch Shell PLC (RDSB), Chevron Corp (CVX) and ConocoPhillips (COP), which are building giant liquefied natural gas plants along its northern coastline.
Any delay to expanding the A$14.9 billion Pluto project would be significant because energy companies are competing for materials, labor and Asian buyers to support their own developments.
Woodside is exploring for gas to support a bigger Pluto, and former chief executive Don Voelte said the company would order long-lead items for additional processing units at the project in Western Australia state if its Xeres-1 exploration well was successful.
The well discovered gas during the second quarter, but new chief executive Peter Coleman has decided to wait before ordering those components that take a long time to manufacture. Appraisal work at Xeres couldn't be completed for technical reasons and testing has been deferred until later in the year, Woodside said in a statement Tuesday.
"Successful outcomes from drilling and appraisal work is one part of the business case required to provide the confidence to order long-lead items for an expansion train," the company added.
Many investors expect Coleman to take a more conservative approach since he took over from Voelte on May 30. Last month, the former ExxonMobil Corp. (XOM) executive announced a six-month delay and A$900 million cost blowout for Pluto's foundation stage.
Coleman's latest move, however, could also indicate that an external gas supply deal for Pluto is near, said Hartleys analyst David Wall.
Woodside is in talks with BHP Billiton Ltd. (BHP.AU) and Exxon about processing gas from the pair's offshore Scarborough field through an expanded Pluto. Wall suspects the pair could take a small equity stake in a second LNG processing unit, or train, of around 10-20%, meaning they would want to be involved in ordering long-lead items.
Woodside said discussions with potential gas suppliers continue and it plans to drill the Pluto expansion exploration well Kelt-1 and appraisal well Noblige-2 in the current quarter.
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