Australia’s Woodside Petroleum and China’s ENN Group signed a 10-year LNG supply deal at a conference in Shanghai, expanding on a co-operation agreement the two sides reached in 2018.
The heads of agreement (HoA) was signed at Shanghai’s LNG 2019 conference and will see Woodside deliver 1 million tpy of LNG to ENN from 2025 to 2035. Woodside will source the LNG from both its existing portfolio as well as from projects in development.
“This HoA demonstrates market support for Woodside’s proposals to expand the Pluto LNG facility and develop the Scarborough offshore gas resource as part of our vision for the Burrup Hub in Western Australia,” Woodside CEO Peter Coleman said in an April 5 company statement.
The Scarborough gas field, off Western Australia, has contingent resources of around 7.3 tcf (206.74 bcm) and will absorb, alongside the expansion of the Pluto LNG terminal, the majority of Woodside’s US$1.6-1.7 billion capital expenditure for 2019. These projects form part of Woodside’s target of doubling LNG production by 2027.
Meanwhile, ENN is hoping to benefit from growing gas demand in China by expanding its gas distribution business. Years of rising demand has led to China becoming the world’s second largest buyer of LNG and largest import of natural gas, and gas consumption in the country is set to grow a further 14% this year. ENN CEO Zhang Yesheng told the LNG 2019 conference that his company is lining up even more international deals.
“For a long period of time in the future, China will be the market with the highest LNG growth in the world,” he said. “Some of our global purchases will land in China. We’ll also do swaps and buy and sell to boost our international trading capability.”
The Woodside-ENN agreement is conditional upon the companies agreeing a fully termed sales and purchase agreement (SPA) and on Woodside reaching a final investment decision (FID) on the Scarborough development project, which is expected by 2020. First gas at the Scarborough field is targeted for 2023.
In October 2018, ENN completed the initial phase of China’s first privately owned and operated large-scale LNG receiving terminal, which is located in Zhoushan municipality. The first phase has a capacity of 3 million tpy and the company is already working to expand this to 5 million tpy by June 2021 through a second stage of development.
Zhang said at the time that his company intended to use the terminal to develop an LNG price index that could reflect the entire East Asian LNG market.