BHP’s petroleum business to merge into Woodside

BHP investment in renewable energy

Woodside and BHP signed an agreement to merge BHP’s petroleum arm into Woodside to create a global top 10 independent oil and gas producer, as first announced in August.

The combined company will have a high margin oil portfolio, long life LNG assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.

BHP CEO Mike Henry said BHP’s petroleum business and Woodside are better together and will create value for BHP shareholders.

“Merging our petroleum business with Woodside creates a large, more resilient company, better able to navigate the energy transition and grow value while doing so,” he said.

“Through the merger we will provide value and choice for BHP shareholders, and unlock synergies in how these assets are managed.”

Woodside Petroleum and BHP Group also gave their final go-aheads to spend $12 billion to develop the Scarborough gas field off Western Australia and expand the Pluto liquefied natural gas (LNG) plant, with the first cargo expected in 2026.

“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,” Woodside CEO Meg O’Neill said in a statement.

The twinned Scarborough and Pluto Train 2 project is essential to the future of Woodside, Australia’s biggest independent oil and gas company, which has had limited growth over the past several years.

The final investment decision for the project was deferred in March last year when oil and gas prices crashed amid the COVID-19 pandemic.

Scarborough will be able to produce 8 million tons a year of LNG for export and 180 terajoules a day of gas for the domestic market. Customers have already signed up to buy about 60 percent of Scarborough capacity, including gas for a proposed urea plant in Western Australia, O’Neill said.

Scarborough gas, which will be processed through Pluto Train 2, will be one of the lowest carbon intensity sources of LNG delivered to customers in north Asia, Woodside said.

Woodside said the all-in cost of supply for LNG delivered to north Asia would be around $5.80 per million British thermal units (MMBtu). That compares with a current Asia LNG spot price around $37 per MMBtu.

Woodside’s share of investment in the project is $6.9 billion. BHP on Monday signed off on $1.5 billion in spending for the first phase of Scarborough development. It is not a stakeholder in the Pluto LNG plant.