Woodside Petroleum has moved into the growing global liquefied natural gas cargo trading market, the Perth-based company setting up a Singapore-based trading arm and taking control of a new LNG vessel in Korea today.
Woodside chief executive Peter Coleman is in the Korean harbour city of Busan for the formal launch of the vessel, which will form part of the company's new LNG trading business. The company revealed in its quarterly report yesterday that it had established a Singapore office from which to run its new third-party LNG business.
The launch came as Woodside announced a sharp drop in revenue for the September quarter. Production of 21.9 million barrels for the period was down 17.4 per cent from a year ago while revenue was down 26.8 per cent to $1.3 billion, with an ongoing outage from its Vincent oilfield and an unplanned shutdown at its Pluto LNG plant driving the falls. The new LNG arm will compete with similar businesses run by heavyweights such as Royal Dutch Shell, BP and BG, and will help position Woodside for the shift already under way in LNG market dynamics.
LNG sales have historically been based around long-term sales contracts that typically last 20 years, providing the certainty needed to underpin the development of multi-billion-dollar LNG facilities. But spot cargoes have become increasingly prevalent as the global LNG market has matured, and now account for more than 20 per cent of all sales.
Woodside hopes its new trading arm will capitalise on its more than two decades of LNG sales experience, allowing it to pick up cargoes from third parties outside Australia and offload them at higher prices to other buyers during peak demand. The trading arm is likely to source its cargoes from LNG producers in regions such as the Middle East and North America, with the latter set to emerge as a boutique LNG producer in coming years off the back of the shale gas boom.
The trading arm will target customers in the Far East, Middle East and the expanding South American market.
Unlike Woodside's other LNG vessels, which are dedicated to cargoes from individual Woodside-operated LNG projects, the new vessel will be unaligned with a specific project. The added flexibility will in theory allow Woodside to negotiate cargo swaps with other parties and potentially reduce shipping distances.
Woodside is also said to be expecting the trading arm to enable its growth projects, such as its Leviathan gas project off Israel (where ongoing legislative wrangling is continuing to hold up the completion of Woodside's purchase of a stake in the project) and its early-stage exploration efforts off Myanmar. Woodside expects the trading business to be a profitable venture in its own right.
Source: The Australian