Woodside (ASX:WPL) gives go-ahead for Scarborough and Pluto Train 2

• Final investment decisions for Woodside’s (WPL) Scarborough and Pluto Train 2 projects, including new domestic gas facilities and Pluto Train 1 improvements, have been finalised
• Announced at the same time was the news that BHP and Woodside have signed a binding share sale agreement for the merger of BHP’s oil and gas portfolio with Woodside
• With the sale of 49 per cent of Pluto Train 2 to GIP, an internal rate of return (IRR) of greater than 13.5 per cent is expected
• Woodside CEO Meg O’Neill says that permitting the development of the world-class Scarborough gas resource is a watershed moment for the company
• Shares in Woodside closed down 1.85 per cent on Monday at $21.70 each

Final investment decisions for Woodside’s (WPL) controversial Scarborough and Pluto Train 2 projects, including new domestic gas facilities and Pluto Train 1 improvements, have been finalised.

The $16.5 billion LNG development is projected to provide considerable cash flow and long-term value for shareholders, Woodside said in a statement to the market.

Announced at the same time was the news that BHP and Woodside have signed a binding share sale agreement for the merger of BHP’s oil and gas portfolio with Woodside.

Woodside said Scarborough gas processed by Pluto Train 2 will be one of the least carbon-intensive sources of LNG exported to clients in North Asia, with the first LNG shipment scheduled for 2026.

With the sale of 49 per cent of Pluto Train 2 to GIP, an internal rate of return (IRR) of greater than 13.5 per cent is expected.

The expected metrics for the integrated development includes an all-in supply cost of roughly $5.80 per metric million British thermal units (MMBtu) for LNG transported to North Asia and a six-year payback time.

Woodside’s total corporate 2P Total Reserves have climbed by over 158 per cent to 2.34 million barrels of oil equivalent (MMboe).

Woodside CEO Meg O’Neill stated that permitting the development of the world-class Scarborough gas resource is a watershed moment for the company.

“Today’s decisions set Woodside on a transformative path. Scarborough will be a significant contributor to Woodside’s cash flows, the funding of future developments and new energy products, and shareholder returns,” she said.

“This capital efficient development leverages Woodside’s existing infrastructure and our proven expertise in project execution. The contracting model, development concept and execution strategy have been designed to reduce cost risk and protect shareholder value.”

The Scarborough reservoir contains only around 0.1 per cent carbon dioxide, Ms O’Neill noted, with gas processed through the expanded Pluto LNG facility to support the decarbonisation goals of the group’s Asian customers.

“The final investment decision is underpinned by quality customer support with approximately 60% of Scarborough capacity contracted, including domestic gas for the proposed Perdaman urea project,” she said.

“Developing Scarborough delivers value for Woodside shareholders and significant long-term benefits locally and nationally, including thousands of jobs, taxation revenue and the supply of gas to export and domestic markets for decades to come.”

WA Premier Mark McGowan welcomed the announcement, saying the project will create 3200 jobs and be a boon for the state.

“In the coming days, we will execute agreements with the Scarborough and Pluto Train 2 joint ventures that will provide energy certainty for the State and support thousands of local jobs, as well as providing a transition fuel source for our major trading partners,” he said.

Shares in Woodside closed down 1.85 per cent on Monday at $21.70 each.