Woodside flags cost increase at Scarborough

4th August 2021 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

Woodside flags cost increase at Scarborough

KALGOORLIE (miningweekly.com) – Oil and gas major Woodside has flagged a 5% increase in the capital cost estimate for its Scarborough development, ahead of a final investment decision (FID) later this year.

The company on Wednesday said that the project would cost an estimated $12-billion to develop, comprising a $5.7-billion investment for the offshore component and a $6.3-billion investment for the onshore component.

The price increase, resulting from refreshed pricing from major contractors, underpins the updated cost estimate, and reflects Woodside’s work with them since 2020 to maximise the value of the project by optimising design and execution planning, and increasing offshore processing capacity.

The cost increase incorporates an approximately 3% cost increase in the onshore component, including modifications to Pluto Train 1 to enable processing of Scarborough gas, and an approximately 8% increase in the offshore component, including an increase in offshore production capacity from 6.5-million tonnes a year to 8-million tonnes a year of liquefied natual gas (LNG) and an additional well.

Woodside acting CEO Meg O’Neill reaffirmed that the Scarborough development was a transformational project that would deliver enduring shareholder value.

“Significant progress has been made towards our targeted FID on Scarborough and Pluto Train 2 this year.

“The cost update includes value-accretive scope changes to deliver an approximately 20% increase in offshore processing capacity and to modify Pluto Train 1 to allow increased Scarborough gas processing. It also reflects the work undertaken with our contractors to optimise the execution schedule and manage costs in preparation for FID.

“Woodside’s contracting strategy for Scarborough reduces cost risk, with approximately 90% of total project contractor spend structured as lump-sum and fixed rate agreements.

“We have commenced the formal processes for selling down our interest in Pluto Train 2 and Scarborough as we target the investment decision later this year and these processes are supported by the updated cost estimate,” she said.

Woodside noted that the expected internal rate of return of the integrated Scarborough and Pluto Train 2 development was greater than 12%, and the project had a globally competitive cost of supply of approximately $6.8 per metric million British thermal units to north Asia and was targeted to deliver the first cargo in 2026 into a market with anticipated robust demand for LNG.