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Melbourne — Woodside Petroleum and BHP Group gave their final go-aheads to spend $12bn to develop the Scarborough gas field off Western Australia and expand the Pluto liquefied natural gas (LNG) plant, with the first cargo expected in 2026.

The approval on Monday came at the same time that Woodside and BHP signed an agreement to merge BHP’s petroleum arm into Woodside to create a global top 10 independent oil and gas producer, as first announced in August.

“Today’s decisions set Woodside on a transformative path. Scarborough will be a significant contributor to Woodside’s cash flows, the funding of future developments and new energy products, and shareholder returns,” Woodside CEO Meg O’Neill said in a statement.

The twinned Scarborough and Pluto Train 2 project is essential to the future of Woodside, Australia’s biggest independent oil and gas company, which has had limited growth over the past several years.

The final investment decision for the project was deferred in March last year when oil and gas prices crashed amid the Covid-19 pandemic.

Scarborough will be able to produce 8-million tonnes a year of LNG for export and 180 terajoules a day of gas for the domestic market. Customers have already signed up to buy about 60% of Scarborough capacity, including gas for a proposed urea plant in Western Australia, O’Neill said.

CEO Meg O’Neill discusses the company’s partnership with BHP on a $12bn LNG project, limiting emissions from the project and the market for LNG.

Scarborough gas, which will be processed through Pluto Train 2, will be one of the lowest carbon intensity sources of LNG delivered to customers in north Asia, Woodside said.

Woodside said the all-in cost of supply for LNG delivered to north Asia would be about $5.80 per million British thermal units (MMBtu). That compares with a current Asia LNG spot price about $37 per MMBtu.

Woodside’s share of investment in the project is $6.9bn. BHP on Monday signed off on $1.5bn in spending for the first phase of Scarborough development. It is not a stakeholder in the Pluto LNG plant.

Green groups have sought to delay, if not derail, the project, amid concerns about carbon emissions from gas worsening climate change.

O’Neill dismissed concerns about remaining environmental approvals still pending for the project.

“As we work through the series of secondary approvals, it is entirely possible that the regulators will ask us to take additional steps, and that's quite normal,” she told Reuters.

A court will hold its first hearing on December 20 on a case brought last year by the Conservation Council of Western Australia (CCWA). The case challenges the state’s approval, without a full environmental review, allowing Woodside to process gas at the Pluto LNG plant from an expanded number of fields.

The CCWA said on Monday it would continue with a co-ordinated national campaign against Scarborough gas.



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