PERTH (miningweekly.com) – Oil and gas major Woodside has warned shareholders that the low oil price environment could persist for the next two years.

Speaking during the company’s annual general meeting, CEO Peter Coleman noted that the oil and gas industry had been confronted not only by the challenges presented by the Covid-19 pandemic and the associated reduction in demand, but also by a supply shock after the collapse of a deal between OPEC and Russia, which led to Saudi Arabia flooding the market with oil.

“The agreement earlier this month between OPEC, Russia and other producing countries will help reduce the extent of the oversupply, but the demand destruction we are seeing is so significant that low oil prices are likely to persist this year, and possibly into next.

“To be frank, this extraordinary confluence of events is the worst situation I’ve seen for our industry in the 36 years I’ve been in this game,” Coleman said.

He noted that Woodside’s disciplined approach to cash flow and debt management allowed the company to respond quickly and decisively to preserve cash flow through these challenging months, and to ensure that it could execute its growth strategy when the time was right.

The company earlier this year announced the deferral of final investment decisions for its Scarborough and Pluto Train 2 projects until 2021, as well as delaying a final investment decision for the Browse liquefied natural gas (LNG) project.

“With the cyclical nature of our industry, a number of projects that were proposed globally and are reliant on project financing will likely not proceed and that, in turn will support LNG prices. I am confident that our proposed projects are cost-competitive, and we are now working towards a final investment decision on Scarborough next year,” Coleman said.

“We are aiming to start construction this year of the pipeline component of the Pluto-Karratha gas plant interconnector, which continues to be a crucial part of our vision for an integrated production hub.”

Coleman said that the company’s near-term growth was also continuing, with a final investment decision reached earlier this year on the North West Shelf’s Greater Western Flank Phase 3 and significant progress on executing the Pyxis Hub and Julimar-Brunello Phase 2 projects.

Work also started earlier this year on the Sangomar phase 1 development, in Senegal, and Woodside and its partners at the project are working on options to reduce the total cost and near-term spend at Sangomar, while protecting the overall value of the investment.

The Sangomar development concept is a stand-alone floating production storage and offloading (FPSO) facility with 23 subsea wells and supporting subsea infrastructure, with the facility expected to have a production capacity of 100 000 barrels a day, and would process the oil before it is exported to market via tanks.

First oil is targeted for 2023.