High costs have prompted Woodside Petroleum Ltd. to scrap plans for the proposed onshore Browse LNG Development at James Price Point (JPP) in Western Australia, but the company is leaving the door open to a floating liquefied natural gas (LNG) development, among other options, to commercialize Browse Basin gas reserves.

A tender evaluation showed that the development would not deliver the required commercial returns, Woodside said. “The cost escalation on Browse has been consistent with other projects in Australia,” said Woodside CEO Peter Coleman. “Unfortunately, the cost escalation has been such that the total cost for Brose have resulted in the current development concept not being commercial.”

The company intends to work with the Browse joint venture partners to evaluate other concepts to commercialize the resources, which could include floating technologies, a pipeline to existing LNG facilities in the Pilbara or a smaller onshore option.

Japanese consumers of LNG have lately been turning up the heat on high oil-indexed prices for the commodity and have begun contracting for supply indexed to much lower U.S. Henry Hub gas prices (see Daily GPI, Feb. 8; Oct. 11, 2012). Coleman said price pressure from Japanese consumers was not a factor in the latest Browse decision.

“U.S. shale gas was not a relevant consideration in our decision,” he said. “LNG marketing was not an impediment in considering the potential LNG development at JPP.”

Woodside is the operator of the East and West Browse joint ventures. It holds a 34% equity interest in the East Browse joint venture and a 17% equity interest in the West Browse joint venture.

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