* Woodside's Coleman sees no threat from LNG alliance
* Buyers' club, flexible contracts could create more
* Buyers 2 yrs from more long-term contracts on megaprojects
By Farah Master
HONG KONG, March 29 Australian energy major
Woodside Petroleum on Wednesday hinted it may in future be
willing to allow buyers of liquefied natural gas (LNG) more
flexibility as part of long-term contracts, saying that in time
this could help create a more liquid market.
Last week, the biggest buyers in the world's top three LNG
consuming countries - Japan, South Korea and China - clubbed
together to secure greater supply flexibility.
The move potentially shifts power to importers amid a
growing surplus, adding pressure on producers like Woodside
and peers Royal Dutch Shell, Chevron
and Exxon Mobil to grant more flexible contracts.
Speaking as one of the first executives of a major LNG
producer to address the buyers' alliance, Woodside's Chief
Executive Peter Coleman said on Wednesday he did not see a
threat from the new grouping.
"We are OK with it, we don't see a threat from it at all,"
he told Reuters in Hong Kong.
The main goal of the buyers' alliance - made up Japan's
JERA, Korea Gas Corp (KOGAS) and China National Offshore Oil
Corp (CNOOC) - is to rid themselves of long-term contracts that
oblige them to take in a fixed amount of cargoes every month and
which do not allow them to sell excess cargoes to third parties.
Coleman did not specifically say Woodside was willing to
grant buyers more flexibility in future, but said that to
"cooperate and move things around" was a sensible thing to do
for the big LNG buyers.
"It actually helps create more liquidity in the market
place, because you have a large volume of LNG moving through the
three different market players," he said.
MORE TRADING, LESS MEGA-PROJECTS
The LNG industry is undergoing huge change as the biggest
ever flood of new supply is hitting the market, with volumes
coming mainly from Australia and the United States.
The oversupply resulted in a more than 70 percent fall in
Asian spot LNG prices LNG-AS from their 2014 peaks to around
$5.50 per million British thermal unites (mmBtu).
However, Woodside has come through the market rout in better
shape than many rivals, with $2.7 billion in cash and undrawn
debt, and sees itself well positioned.
Woodside operates large LNG export facilities like Pluto and
the North West Shelf, and is a partner in the $34 billion
Wheatstone project, scheduled to start up later this year. It
also has plans for another project, Browse, but for which it has
not yet made a final investment decision (FID).
Still, while oversupply will likely trigger more trading in
LNG as producers sell uncontracted cargoes, Coleman said it made
it difficult to develop large new production projects.
"The challenge today is there is not a market you can go to
and develop a mega project ... The mega projects - 15-20 million
tonnes (annual capacity) - still require buyers in long-term
contracts to finance," he said.
Thanks to high spot prices of up to $20 per mmBtu over past
years, producers and buyers were keen to sign long-term
contracts that guaranteed supplies at stable prices.
Now, with oil and gas prices much lower and abundant
supplies, LNG importers are keener on freely trading LNG instead
of entering fixed term deals.
"Buyers are still two years away from being able to take out
(new) long-term contracts for big projects," Coleman said.
(Reporting by Farah Master; Writing by Henning Gloystein;
Editing by Tom Hogue)