GOT GAS: Why’s Woodside all sunny about East Timor?
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After years of rejecting East Timor’s call to develop the Greater Sunrise through a liquefied natural gas plant in the impoverished country, Woodside Energy (ASX:WDS) has done an about face and accepted that it might not be a bad idea after all.
The gas major’s previous opposition had centred around the challenges of building a pipeline to transport gas from the field – located 150km south of East Timor and 450km northwest of Darwin – across a deep ocean Timor Trough.
So what has changed?
Well, in a joint press release with its partners East Timor’s state-owned TIMOR GAP and Osaka Gas Australia, the company noted earlier this week that it would undertake concept select program for the development of Greater Sunrise.
The reason for the change can be found in company chief executive officer Meg O’Neill’s comments that development of new technologies and growing demand for safe and reliable LNG meant it was the right time to bring forward the concept select program.
O’Neill rather pointedly noted the JV was evaluating technologies such as modular LNG, that did not exist in the past, which is about as clear a sign as anything else that the new technology could potentially offset any challenges presented by laying a pipeline across a deep sea trench.
Advancing Greater Sunrise, which was first discovered almost 50 years ago, would provide benefits to East Timor as the Bayu Undan project starts its decline.
New technology making such a development possible is certainly a viable reason for Woodside to relook its stance but are there any other reasons for the decision?
What if, just maybe, recent developments in Australia have made developing Greater Sunrise more attractive in East Timor?
We speak of course of the Australian Government moving to tighten up its Safeguard Mechanism, which requires Australia’s largest greenhouse gas emitters – and Woodside is most certainly one of them – to manage and eventually reduce emissions.
This would of course require a greater level of investment in – presumably – an Australian-domiciled project to ensure that it can keep emissions down, or failing that, to purchase enough Australian carbon credit units.
And just maybe, this extra level of investment would act to further offset the extra capital required to make crossing the Timor Trough a more attractive prospect.
East Timor is also likely to favour a project which provides it with revenue and jobs and has rather noticeably refrained from setting a quantified emissions reduction target.
Is this a somewhat cynical take on why Woodside might make such a decision? Sure. But the Safeguard Mechanism certainly could have added another factor to its decision making process and maybe just enough to tilt the equation in that direction.