The Rudd Government is set to come under huge pressure from Woodside Petroleum to strip valuable Browse Basin gas leases off multinationals including Chevron Corp and Royal Dutch Shell unless an agreement on a $30 billion Kimberley liquefied natural gas project can be reached.
Six of seven leases covering the Woodside-operated Browse Basin project are retention leases, each of which expired last December and is the subject of a renewal application.
The renewal applications will prove the sternest test yet for Federal Resources Minister Martin Ferguson, who has threatened "rigorous scrutiny" to make sure petroleum companies do not sit on valuable gas reserves that are ripe for development.
But Mr Ferguson is yet to follow through on his threat to strip companies of their leases.
His hand, however, may be forced by the increasingly bitter stand-off between Woodside and its four Browse Basin project partners — Chevron, Shell, BHP Billiton and BP — over development plans for the 14 trillion cubic feet gasfield off WA's Kimberley coast.
Woodside, as operator and 50 per cent owner of the venture, is committed to developing a greenfields LNG site at James Price Point, north of Broome, and wants to start design and engineering work as soon as possible.
Analysts believe the cost of such a development could be $30 billion. But sources close to Woodside's partners claim it may top $50 billion, a figure Woodside is disputing.
Woodside's James Price Point proposal has the support of Mr Ferguson and Prime Minister Kevin Rudd because of its positive economic impact on the jobs-constrained Kimberley, in particular the opportunities it would present to the region's Aboriginal population. But Woodside's partners are vehemently opposed to the James Price Point development and instead want to use the Browse Basin gas as backfill for when reserves at the North West Shelf venture, which they also own, start running out next decade.
A pipeline from the Browse Basin to the North West Shelf's LNG plant near Karratha would cost a fraction of the likely budget for James Price Point.
Woodside is arguing that the Browse Basin leases are commercially viable — a key factor when the Government decides whether to renew retention leases — and is expected to lobby Mr Ferguson hard to exert pressure on the joint venture partners to either relinquish their interests, or agree to a development at James Price Point.
The West Australian revealed Woodside's aggressive lobbying strategy last month after reporting the company had submitted a field development plan to the Federal Government for the Wheatstone gasfield leases, which are held by Chevron. Wheatstone is also the subject of retention leases and Woodside, which is desperate for more gas for its Pluto LNG project, has accused Chevron of sitting on the field with no development intentions.
Woodside wants Mr Ferguson to strip Chevron of the leases, or at least force it to process the Wheatstone gas through Woodside's Pluto site.
PETER KLINGER
