Woodside raises Scarborough cost estimate ahead of FID

Australian energy giant Woodside has increased the cost estimate for the offshore as well as the onshore part of the Scarborough project development by five per cent as it is working to make a final investment decision this year.

The Woodside-operated Scarborough gas resource is located offshore, approximately 375 km west-northwest of the Burrup Peninsula and is part of the Greater Scarborough gas fields.

Ahead of the FID planned for this year, Woodside has finalised the technical work to support execution readiness and completed an update of the capital expenditure requirements for the Scarborough development.

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.

According to Woodside, the updated cost estimate is $12 billion (100 per cent project, nominal), comprising $5.7 billion for the offshore component and $6.3 billion for the onshore component.

The cost estimate is approximately 5 per cent higher than the previous cost estimate announced in November 2019 and incorporates an approximately 3 per cent cost increase in the onshore component, including modifications to Pluto Train 1 to enable processing of Scarborough gas.

It also incorporates an approximately 8 per cent increase in the offshore component, including an increase in offshore production capacity from 6.5 Mtpa to 8.0 Mtpa of LNG and an additional well.

The expected internal rate of return (IRR) of the integrated Scarborough and Pluto Train 2 development is greater than 12 per cent. It has a globally competitive cost of supply of approximately $6.8/MMBtu to north Asia and is targeted to deliver the first cargo in 2026 into a market with anticipated robust demand for LNG.

Woodside Acting CEO, Meg O’Neill, said: “Significant progress has been made towards our targeted final investment decision on Scarborough and Pluto Train 2 this year.

“The cost update includes value-accretive scope changes to deliver an approximately 20 per cent 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 per cent 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 concluded.

Woodside will develop the Scarborough gas resource through new offshore facilities connected by an approximately 430 km pipeline to a proposed expansion of the existing Pluto LNG onshore facility (Pluto Train 2).

The proposal is to initially develop the Scarborough gas field with between seven and nine high-rate gas wells, tied back to a semi-submersible floating production unit (FPU) moored in 950 m of water close to the Scarborough field.