Woodside's new CEO must navigate LNG projects with high costs through glut risk
Woodside Energy is facing a leadership shake up after BP's?chief executive Meg O'Neill's unexpected departure for the top position at BP. This comes as the Australian 'firm' is trying to deliver key projects on a market that's braced for an oversupply.
Analysts say that the oil and gas "producer" is expected to continue with its global strategy of growth, which requires sustained investment in both new assets and continuity within mature fields. After project delays and rising costs, it will be important to advance the Louisiana LNG project.
The Louisiana LNG project, valued at $17.5 billion, will be Woodside's key project. Joshua Runciman is an analyst at the Institute for Energy Economics and Financial Analysis.
Woodside must also find buyers for its LNG on a market which is showing the first signs that there's a glut of supply. This challenge may be compounded by an uncertain growth in LNG demand.
Woodside shares fell 2.65% after the news of O'Neill’s departure.
Woodside, in a move to enter the North American LNG market, acquired Tellurian's Louisiana LNG project and purchased it for $1.2 billion. Woodside is now seeking equity partners who will reduce capital expenditure risks and aim to achieve 50% ownership. The company is also looking for supply?offtakers to help with the project.
The new CEO must also ensure the local supply of gas. Woodside was criticized for not supplying Western Australia, where there is a reservation policy of 15%. Large-scale users have also complained about the Pluto LNG project.
Woodside's west projects include the Scarborough Energy Project, and the Browse Gas Project to supply the North West Shelf Liquefied Natural Gas plant.
The domestic market has run out of options, said Kaushal RAMESH, vice president of Rystad Energy.
The demand for gas here is increasing.
The Timor LNG Project is a step further.
Last month, East Timor and Woodside announced a new study on sending gas to this small nation as part of a 5 million metric tons greenfield development. Dili is adamant that it will not accept any gas being sent to Darwin in Australia. This was the first time the two had suggested a date for the start, which could as early as 2032.
RISKS OF SUCCESSION
Analysts expect the company's new chief executive to be a?internal' candidate. They have named Woodside's acting chief executive Liz Westcott, Chief Commercial Officer Mark Abbotsford, and CFO Graham Tiver among potential candidates.
O'Neill's exit comes at a sensitive time. Scarborough is about to ship its first LNG cargo next year, and Woodside is looking for more equity stake sales in Louisiana LNG.
Saul Kavonic is the head of energy research for MST Marquee.
Maintaining continuity in high-level relationships is important.
GLOBAL GLUT SUPPLY
Woodside's new CEO will have to deal with a global LNG glut in the 2030s as more North American LNG production comes on line and Qatar expands its North Field Expansion. This could put pressure on LNG prices and project returns.
Runciman, of IEEFA, said that the new CEO at Woodside will have to manage price risks as well as potential impacts on cash flow and shareholder return. (Reporting from Emily Chow in Singapore, Helen Clark in Perth and Editing by Tony Munroe & Elaine Hardcastle).
(source: Reuters)
