Myanmar: Woodside powers up

Myanmar: Woodside powers up

Myanmar is the centre of attention for Woodside Energy following the
Australian company's discovery of gas off the coast of Rakhine state last
year. It is now preparing to invest around 25-30% of its exploration budget
in Southeast Asia to help realise the potential of the region.

Headquartered in Perth, Woodside has a global presence and an annual
exploration budget of around US$350 million. Asia is a very mature market
for oil and gas in terms of both exploration and production as well as
market penetration, according to Woodside CEO Peter Coleman.

"Our focus really is on Myanmar at the moment," he said in an interview with
Asia Focus.

"We're looking at Myanmar for a couple of reasons. One is that we were an
early entrant into Myanmar. Secondly, we looked at the geology of Myanmar,
particularly the Rakhine basin, and we found that there were potential
opportunities there, although it would probably be gas, and we have been
successful in acquiring exploration acreage there. We will start a four-well
drilling programme in January of next year."

Woodside also sees the Myanmar economy opening up and requiring more and
more energy, while the growth of its neighbouring countries will also drive
demand.

"A lot of Myanmar's indigenous [energy] supply was in fact going to its
neighbours and as they use it to grow their economies, it is pretty easy to
see that if neighbouring countries are growing at that sort of rate that
there is potential for Myanmar to grow at that rate," Mr Coleman said.

Woodside is also looking at the possibility of supplying oil and gas in
Indonesia. The Thailand market, on the other hand, is "pretty well full", he
said. The company has a knowledge-sharing partnership with PTT Plc but there
is no direct business between the two companies.

"This is a good example of where collaboration can actually work even when
companies are not doing business together," he said.

Despite the low prices that have challenged the industry for the past two
years, Mr Coleman said some companies have been doing "quite well" by
changing the way they operate. The upside is that low oil and gas prices
make the conventional fuels more competitive as energy sources.

"As markets grow, people are looking more and more toward oil and gas,
particularly gas in Asia as an energy source, whether it be for transport
fuel or for industry, so I would say that if there is a positive out of low
prices, it means the energy we produce is now more affordable to a lot of
Asian markets and we are starting to see people switch fuels and go more and
more toward gas," he said.

"For us it is not about surviving, it is about making choices and designing
a business plan where you make long-term choices to ensure that if the oil
price does go low, then your business is still strong. For us that is the
conscious choice of the company, that we chose not to do something when
prices were high simply because if prices did go low, then it would have
been difficult for us as a company."

That prudent approach to a highly cyclical commodity market has allowed
Woodside to maintain a strong balance sheet and still pay some US$7 billion
in dividends to their shareholders over the past five years. It has
maintained its 80% dividend payout ratio in 2016.

In 2015, Woodside produced 92.2 million barrels of oil equivalent (MMboe)
while reducing its break-even cash cost of sales to $11 per barrel of oil
equivalent, representing a 22% reduction from 2014. Nevertheless, production
in 2015 was actually 3% lower than in 2014 and sales revenue was down 36% on
lower prices. The average price of Brent crude last year was $53.60 a
barrel, 46% lower than the year before.

The company expects to produce between 92 million and 95 million barrels
this year, as it is among the few oil and gas companies that have continued
to invest in new exploration ventures even as global oil prices were
sinking. When the cycle picks up again, Woodside will be in a good position
to make more investments, said Mr Coleman.

Its acquisitions last year included the Wheatstone LNG project (a pipeline
and onshore plant located near Onslow in the Pilbara region of Western
Australia); the Balnaves oil field in the Carnarvon basin offshore northwest
Australia; and the Kitimat LNG project in northwestern British Columbia in
Canada.

The company is also preparing to invest $2 billion in the Greater Western
Flank Phase 2 (GWF-2) project with the initial startup expected in the
second half of 2019. It is the fourth major gas development in the North
West Shelf (NWS) area off Australia in the past seven years. NWS represents
a total investment of more than $34 billion and is a joint venture involving
six major international companies including Woodside, which has a 16.67%
stake. Other partners include Chevron, BP and Shell.

The icing on the cake last year for Woodside was the discovery of gas in
Block A-6 in the Rakhine Basin.

Woodside has also been using the lower-price environment to drive down costs
to enable cost-competitive development opportunities, said Mr Coleman.

"With respect to cost-cutting and getting more efficient, we are no
different from anybody else in the industry, where we went thought a very
large cycle and inefficiency grew into our businesses, so we have to take
stock and go back and reflate by cutting those inefficiencies out," he said

Shell has been cutting thousands of jobs around the word this year after
reporting an 87% slump in its annual net profit to $1.94 billion in
February. Woodside and other Australian oil and gas companies, including
Origin Energy and Santos, have also shed hundreds of employees in the past
year as they adjust to the sharp fall in earnings.

But Woodside's appetite for investment is still apparent as it acquired a
65% stake in a production-sharing contract off Senegal and Guinea-Bissau in
February 2016. The deal could increase contingent resources by 230% in a
"best estimate", it said. It is also adding more natural gas assets to its
8.7 trillion cubic feet in Australia after a deal worth $250 million with
BHP Billiton in November. Meanwhile, the Wheatstone LNG development, a
flagship for the company, is expected to start operations by mid-2017.

If Woodside finds something in Myanmar that is in line with its development
plan, it will definitely pursue the opportunity there, said Mr Coleman. The
next two years, he said, would "very important in Myanmar" as the company
starts drilling in blocks that were awarded in 2013 and 2014.

"The next two years will be very important to see if there actually are
resources there that are commercial and then we will work through the
commerciality part of it," he said.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1151881/woodside-powers-up

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com