Woodside's new CEO must navigate LNG projects with high costs through glut risk
Woodside Energy is facing a leadership shake up after Meg O'Neill's unexpected departure for the top position at?BP. This comes at a time when the Australian company is trying to deliver on key projects in a?braced?for a glut of supply.
Analysts say that the oil and gas company will continue to pursue its global growth strategy. This requires continued investment in new assets as well as continuity in 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.
"More broadly, Woodside must find buyers for its gas in a market where there are the first signs that a glut is developing. Uncertain LNG growth "may compound this problem."
Woodside shares fell 2.65% after the news of O'Neill’s departure on Thursday.
Woodside, in a move to enter the North American market strategically, acquired Tellurian, and its Louisiana LNG Project for $1.2 billion. It is now seeking equity partners, to reduce capital expenditure risks. The goal is 50% ownership. It is also looking for supply offtakers to help with the project.
The new CEO must also ensure the local supply of gas. Woodside is under fire for not supplying Western Australia where a reservation policy of 15% applies. Large-scale users claim that the Pluto LNG project has failed to deliver.
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.
East Timor, Woodside and the United Nations announced a study last month to send gas to East Timor in a 5 million ton greenfield development. Dili is adamant that it will not accept any gas being sent to Darwin in Australia. This was the first time that they 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 candidate from within, naming Woodside acting CEO Liz Westcott and chief commercial officer Mark Abbotsford as possible candidates.
O'Neill's exit comes at a sensitive time. Scarborough is about to ship its first LNG cargo in the next year, and Woodside is looking for more equity stake sales.
Saul Kavonic is the head of MST Marquee's energy research.
It is important to maintain continuity in high-level relationships, with customers, contractors, and joint venture partners.
GLOBAL SUPPLY GLUT
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 return.
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)
