Chevron gets out of Browse

CHEVRON Australia has put pen to paper on an asset swap deal with Shell which will see it exit the Browse joint venture and refocus on the Carnarvon Basin.
Chevron gets out of Browse Chevron gets out of Browse Chevron gets out of Browse Chevron gets out of Browse Chevron gets out of Browse

Under the agreement, which is still subject to regulatory approvals, Chevron will swap its 16.7% stake in East Browse title two, and 20% stake in titles three and four in exchange for Shell's 33.3% stake in the WA-20-P and WA-42-R blocks.

This essentially means Chevron is out of the Browse joint venture while Shell has bumped up its stake in the field.

In addition, Shell will pay a consideration of $450 million to Chevron. The deal all up is thought to be worth roughly $2 billion.

For Chevron, the deal is a way to refocus on its Wheatstone project.

"Acquiring the remaining interests in WA-205-P and WA-42-R fits strategically with our long-term plans to grow our Wheatstone area resource base, and create expansion opportunities for the Wheatstone project," Chevron's vice chairman George Kirkland said.

Meanwhile president of Chevron's Asian Pacific exploration and production arm Melody Myer said the deal reaffirmed its commitment to Australia.

"Australia is a key focus for Chevron, evidenced by our investment and development of the Gorgon and Wheatstone projects, and strong expansion and appraisal program," she said.

"Consolidating our Carnarvon Basin position furthers our progress towards becoming a leading liquefied natural and domestic gas producer in Australia and Asia-Pacific."

Shell international upstream director Andy Brown also hailed the deal as a simplification of the Browse JV.

"This is a good deal, not only because it aligns with Shell's strategy of bigger direct stakes in key gas resources but because it also helps to simplify the ownership of the Browse gas fields," he said in a statement.

"The Browse gas fields are a key LNG development opportunity for Australia.

"We're committed to continue working with Woodside (as operator), the other JV participants and key stakeholders to secure the best possible development plan for this important resource."

Initial analysis*

While Woodside is keeping mum on the deal, the deal has a number of implications.

Firstly, it could simply be a sign that Chevron wants to refocus its project base in Australia. With an interest in the North West Shelf, and operating the Gorgon and Wheatstone projects, it is unlikely Chevron would be too keen to partake in another greenfield project, given an increasingly tough cost environment.

Chevron has also been a critic of sending gas from the Browse field to James Price Point and the removal of Chevron from the JV may just be a relief for members of the JV hoping to get JPP up and running.

It could also be read as an attempt by Shell to grab a further stake in the project. With an enlarged stake and that pesky circa 23% shareholding in Woodside, it will now have a bigger say than ever on the fate of gas from the Browse fields.

There are noises that Shell has become increasingly wary of the costs associated with development at James Price Point, but Shell's Australian chairperson Ann Pickard remained diplomatic on the question when asked about her stance on the project by journalists at last month's Australia Gas Technology Conference.

Either way, Shell will undoubtedly be pushing for the most economic return on the project to bolster Woodside's share price as it looks for an exit.

Investors will also want to know what role Woodside had in facilitating the deal, if any.

*Story first published in sister publication yesterday.

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