Chevron will start a formal sale process for its 16.67% interest in the North West Shelf (NWS) Project in Australia after receiving unsolicited approaches “from a range of credible buyers.” The project is one of Australia’s first LNG export ventures.
Valuations of the stake ranged as high as $6 billion prior to the pandemic. However, following a sharp drop in LNG prices this year, the value has dropped to $3-4 billion, according to analysts’ estimates.
The other equal participants in NWS Project are Woodside Petroleum Ltd. (operator), BP PLC, Royal Dutch Shell PLC, BHP Group, and Japan Australia LNG.
Chevron said now is a good time to consider exiting as the facility is transitioning from selling gas owned by the partners to opening its services to new suppliers, an arrangement known as tolling.
“The NWS Project is shifting its focus towards becoming a globally competitive third-party tolling facility, and this is the appropriate time for Chevron to consider fair value proposals from potential buyers,” Chevron said in a statement.
The Northwest Continental Shelf Project has been in operation for more than 30 years. As its foundational gas fields begin to dry up, the project has been considering options for maintaining production. Woodside is eager to inject natural gas from its Browse project into NWS. Chevron also has natural gas resources in the region, which can feed into the northwest region.
Chevron said that it remains committed to the Australian market as operator of the giant Gorgon and Wheatstone LNG projects, also in Western Australia. It is also re-entering the country’s retail fuel market following 2019’s $292-million acquisition of Puma Energy.
“Chevron continuing to high-grade its portfolio and putting its 16.7% stake in the NWS up for sale makes a lot of sense. We see the NWS facility coming off full production this year and going forward it will need third-party gas to keep the plant full. For the NWS JV partners, this means an increasing proportion of tolling revenue will be generated, unless each party can monetize its own gas molecules through the facility,” said David Low, senior analyst, Wood Mackenzie.
“Chevron unsuccessfully tried to monetize the Clio/Acme asset via the NWS last year and is unlikely to be able to monetize any of its gas through the facility in the near-term. We see this as part of the reason its stake in the NWS is up for sale.
“In terms of buyers, there are a few likely suitors, but of the existing participants we see Woodside as the most likely buyer. It is well-positioned financially and has announced it is ready and looking for M&A opportunities in Australia.
“We still see Australia as a strategically important part of Chevron’s portfolio – it is in fact one of its most important countries in terms of remaining upstream value. Chevron will continue to focus on squeezing maximum value from its large LNG projects, Gorgon and Wheatstone, without the distractions of the NWS,” Low said.
