INTERVIEW-Woodside sees no threat from U.S. LNG

Thu Jun 7, 2012 12:38pm BST

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* Woodside shrugs off U.S. LNG exports

* Still sees opportunities to get premium prices for LNG

* Woodside sets sights on assets outside of Australia

By Rebekah Kebede and Jonathan Gordon

KUALA LUMPUR, June 7 (Reuters) - The chief executive of Australia's Woodside Petroleum (WPL.AX) brushed aside concerns that cheaper U.S. gas supplies could undermine the Asian liquefied natural gas market and the company's pricing power.

Asian spot LNG prices LNG-AS of around $18 per million British thermal units (mmBtu) compare with around $2.40 per mmBtu for U.S. natural gas NGc1, a price difference that has set the regional market buzzing with the possibility of a surge in cheaper supplies for consumers.

"I don't see Henry Hub (gas) fundamentally changing the market at all. I do see it entering into the market and I see certain buyers who might be attracted by that," Peter Coleman, the CEO of Australia's largest oil-and-gas company, told Reuters in an interview on Thursday.

Coleman said he had received a lot of questions from customers about the possible impact of U.S. LNG exports, but he does not expect it to hit Woodside's ability to garner a premium price for its LNG.

"We've been a reliable supplier for many, many years. We want to continue to do that, we want our buyers to value that," he said.

For risk averse customers, especially Japan, supply security is paramount. Asian LNG is often sold in decades-long contracts with a premium for extended supply security. Woodside is a major supplier to the world's top LNG importer, Japan.

Woodside first started producing LNG from the North West Shelf, Australia's largest LNG plant, in 1989, and began producing from its second facility, Pluto LNG, in April.

Pluto, the pet project of Coleman's predecessor, Don Voelte, is Australia's first new LNG output in six years, and, alongside Angola LNG, the only new supply due to enter the global LNG market by 2014 or 2015.

That puts Woodside at an advantage, Coleman said.

The CEO, an Australian, joined Woodside just over a year ago after a 27-year career at Exxon Mobil (XOM.N).

Under his leadership, Woodside has taken a more cautious approach, providing more conservative outlooks on project timelines, including the expansion of Pluto.

Coleman's predecessor, Don Voelte, was more outspoken and led an aggressive effort to expand Woodside's LNG portfolio.

LNG OUTLOOK

Asian LNG prices have more than doubled since early 2011 when Japan's Fukushima nuclear disaster stoked a surge in demand from the country for gas to fire power plants as nuclear power fell quickly out of favour.

Coleman said he expected LNG prices to remain strong because demand would outstrip supply for at least the next couple of years. He declined to give a specific forecast.

A global economic slowdown is not a cause for immediate concern either, Coleman said.

"It won't slow down anything we're doing at the moment. But we do have some big decisions," he said.

Woodside expects to make a final investment decision on its Western Australian Browse LNG project by mid-2013. The project, which analysts estimate will cost around A$30 billion, has attracted opposition from some Aboriginal groups and environmentalists due to its proposed location.

"Browse is a big decision to be making and we'll be making that in the next 12 months and clearly we'll be trying to understand globally what's happening before we make that decision," Coleman said.

BEYOND AUSTRALIA

Coleman also said that Woodside, which has focused its operations in Western Australia, where it is headquartered, is setting its sights on assets abroad.

"Over time, if we continue to grow as a company, we need to expand our base ... that's going to see us looking at other basins, not only in Australia," Coleman said.

Last month, Woodside was one of 15 companies, including majors such as Total (TOTF.PA), to bid on nine offshore gas blocks in Cyprus.

In its ventures abroad, Woodside is likely to focus on assets that are similar to those that it already owns in Australia, Coleman said.

Cyprus fits a few of those criteria as it is a deepwater asset, offshore, likely to be developed into LNG and in an area that the company considers geopolitically feasible to work in.

However, the company is not ready to venture into shale gas yet.

"We need to understand shale, we need to understand unconventionals (but) it's not something today that's active for us," Coleman said, adding that Woodside is not dismissing it as an option in the long term.

(Editing by Neil Fullick and Himani Sarkar)

((rebekah.kebede@thomsonreuters.com)(+61 402 974 273)(Reuters Messaging: rebekah.kebede.thomsonreuters.com@reuters.net)) Keywords: WORLD GAS/WOODSIDE

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