Regulators Rudely Stir Woodside From California Dreaming
The Age
Saturday January 17, 2009
THE Californian gas supply dreams of Australia's biggest oil and gas producers are dead in the water.
Trumpeted in recent years as a $60 billion market ready for the taking, poor market conditions and California's tough and highly political permitting process for offshore gas-receiving terminals have now killed off the aspirations in that area of both BHP Billiton and Woodside.Regulators blocked BHP's proposed $US800 million Cabrillo Port project after strong lobbying by environmentalists and celebrities back in 2007, and Woodside yesterday conceded defeat with its OceanWay proposal.Both projects envisaged the export of liquefied natural gas to facilities off the coast of Los Angeles. The gas would be regasified and pumped onshore into the region's existing gas pipeline network.The projects were first proposed after the 2000-01 energy crisis in California. The expectation was that the state would have no choice but to accept imported gas to meet long-term demand and to keep a lid on domestic onshore gas prices.But gas demand has slumped and domestic supplies of gas are now plentiful, due in part to periods of strong gas prices. Forecasts for gas consumption growth suggest there will be no change for years to come.Woodside's OceanWay project had been "suspended" as "current conditions were not right for the proposed development", the group said yesterday.The proposal involved LNG being converted back to natural gas after being unloaded onto a regasification tanker 45 kilometres off the coast.The gas would then be unloaded into an underwater buoy connected to pipes feeding the southern California market through an entry point near Los Angeles International Airport.Woodside never made any capital-cost estimates for OceanWay, which remained subject to approvals by US regulators.It was widely expected, however, that it would cost more than BHP's proposal.Woodside shares fell 52 to $33.53 yesterday, but the fall had more to do with the slump in world oil prices to five-year lows than it did with any disappointment about OceanWay being put on ice.
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