Sydney (Platts)--12Dec2012/532 am EST/1032 GMT

Resources giant BHP Billiton has agreed to sell its stake in the Woodside Petroleum-led Browse gas joint venture in Western Australia to PetroChina for $1.63 billion, a move analysts hailed as putting the project back on track to be developed.

Under the terms of the deal, BHP Billiton will sell its 8.33% interest in the East Browse joint venture and 20% stake in the West Browse joint venture to PetroChina International Investment (Australia), delivering the Chinese company a unitized share of about 10% in the overall project. The transaction is subject to regulatory approvals, but is expected to be completed in the first half of 2013.

"This is an excellent opportunity for both companies," BHP Billiton Chief Executive Petroleum Michael Yeager said in a statement. "PetroChina has acquired an interest in a world class gas resource and BHP Billiton has exited a non-strategic asset."

Woodside and its other partners in the Browse joint venture hold pre-emptive rights over BHP Billiton's interest, should they choose to match PetroChina's offer. The other partners are BP, Japan Australia LNG and Shell.

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Japan Australia LNG, which is a joint venture between Mitsubushi and Mitsui, bought its 14.7% stake in the Browse joint venture for $2 billion in May this year. That sale reduced Woodside's holding in the project to 31.3%.

Shell hiked its stake in the venture in August this year, when it swapped its interest in the Clio-Acme fields, which lie in the Carnarvon Basin, for Chevron's 16.7% stake in the East Browse licenses and its 20% of the West Browse permits. That deal raised Shell's holdings to 25% at East Browse and 35% at West Browse.

Woodside has been planning to develop the joint venture's Browse Basin gas to supply a 12 million mt/year LNG project, to be located at James Price Point in Western Australia's Kimberley region. The partners' resource totals 15.5 Tcf of gas and 417 million barrels of condensate, held in the offshore Torosa, Calliance and Brecknock fields.

Woodside is currently evaluating tender bids and undertaking an assurance process to determine costs and economics for the project, with a view to making a final investment decision in the first half of 2013. Local industry observers are expecting the three-train development to cost as much as A$45 billion ($47 billion).

The Browse joint venture was earlier this year granted a one-year extension of its government-imposed deadline to formally approve an LNG project based on its offshore gas fields. The original deadline was imposed by the Australian federal government in 2009 under the terms of lease renewal conditions, which required the joint venture to spend A$1.25 billion on front-end engineering and design, and to take FID on the proposed LNG project by the middle of 2012.

The Western Australian state government has designated the greenfields site on James Price Point in the Kimberley region as a processing precinct or hub for all the gas to be developed in the offshore Browse Basin. Under its retention lease conditions, the Woodside-led joint venture was required to build its onshore liquefaction facilities at James Price Point, unless it could demonstrate an alternative development concept was likely to be commercially viable at an earlier time.

The James Price Point site is in an environmentally and culturally sensitive area, however, and has been mired in controversy over recent years as some local landowners have refused to support a A$1 billion social and economic benefits package signed last June by Woodside and the Goolarabooloo Jabirr Jabirr native title claimant group. The location of the gas processing hub has also been criticized by environmental activists.

Chevron and BHP Billiton have in the past expressed reservations about the viability of the James Price Point development proposal. Since Shell raised its stake in the project in August, local industry watchers have also speculated that its floating LNG technology might make more economic sense as a development option.

PETROCHINA MOVE SEEN AS POSITIVE FOR STRANDED BROWSE BASIN GAS OWNERS

PetroChina's move is a clear positive for Woodside and other stranded gas owners in the Browse Basin, Bernstein Research analyst Neil Beveridge said in a note. "It effectively aligns the partnership around an LNG development which we have been skeptical of but now see as likely," he added.

The Chinese giant's acquisition implies a resource value of $5.4/barrel of oil equivalent, up from the $4.4/boe implied by Japan Australia LNG's Browse purchase, Beveridge said.

Credit Suisse rated the acquisition as "really quite expensive" at $164 million per percentage stake, compared with the $136 million per percentage stake paid by Japan Australia LNG. It was also much higher than the $60 million per percentage stake paid by Tokyo Gas for 1.575% of Inpex's Ichthys project in the Browse Basin in January, Credit Suisse said.

"With misaligned partners BHP and Chevron out of the project and Chinese and Japanese buyers in, the partnership is now effectively aligned on the development of Australia's last major greenfield LNG development," Bernstein's Beveridge said. "The only outstanding uncertainty is now development cost, although the move by PetroChina [which appears to have a global gas alliance with Shell] would seem to indicate a confidence that the project can move ahead."

Browse is one of the most expensive undeveloped greenfield LNG projects on the market, according to Beveridge. He added that PetroChina's expensive foray into a stranded high-cost LNG development indicated a lack of confidence in alternative supplies such as Russian pipeline gas, US LNG exports and potentially shale gas being available in China after 2017-2018.

The deal might also point to uncertainty about Arrow Energy, the coalseam gas-based LNG project being pursued by Shell and PetroChina in the eastern Australian state of Queensland, Bernstein Research said. The 50:50 Arrow joint venture is pursuing an 8 million mt/year LNG project on Curtis Island in Gladstone, but Shell earlier this month indicated it would push back an FID from the scheduled late 2013.

PetroChina first started importing LNG into China in 2011 via its 3.5 million mt/year Rudong terminal in Jiangsu and the 3 million mt/year Dalian terminal in Liaoning. The company was supplied with 5 million mt/year term LNG from Qatargas.

It is planning to build at least three more import terminals in Guangdong and Guangxi provinces in the south and Hebei in the north, and has agreed to take 3.25 million mt/year of LNG from Chevron's Gorgon project off Western Australia.

--Christine Forster, christine_forster@platts.com
--Song Yen Ling, yen_ling_song@platts.com
--Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

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