Woodside Petroleum Limited (Woodside Petroleum) is in talks with five potential customers about LNG supply agreements to support the expansion of its $12 billion Pluto LNG development in Western Australia.

With the construction of the Pluto LNG Project progressing, Woodside is preparing for the development of a second and third LNG train, in addition to a pipeline gas facility.

The Pluto Train 1 (the first LNG processing train at Pluto) is almost 72.5% complete. The company has already secured all of the 4.85 trillion cubic feet (tcf) of gas it requires for this project, leaving a spare 0.4 tcf of gas for the Pluto Train 2 development. The Train 1 is expected to produce first LNG in 2011 and will likely hit the full capacity of 4.3 million tones a year by mid-2011.

Woodside Petroleum further needs to identify 1.4 to 2.7 tcf of gas for Pluto Train 2. The feed for the second LNG train needs to be sourced internally and bought from third parties. The Train 2 will require 3.8 tcf of gas for 15 years of production and 5.1 tcf for a 20 year operation. The second LNG train is likely to come online in 2013. The company has already completed feasibility studies and basis of design work for LNG Train 2 in 2008.

Woodside Chief Executive Don Voelte said: “We expect the equity capacity designated to other resource owners to be approximately 1.5 tcf.”

“In addition, another 0.5 tcf will come from existing discoveries or other gas secured commercially. Therefore, we need to identify 1.4 to 2.7 tcf of gas that (will be) probably accumulated from our 20 plus well exploration drilling program coming up,” he said.

The Pluto Train 3 is expected to start production in 2014. In addition, the company also expects to add two more trains in following years as it identified additional gas or secured supplies from other explorers in the region.

The company has notionally allocated between 10 and 35% of Pluto Train 2 and 3 for third party gas.

On successful completion of three LNG processing trains, the company expects to produce over 12 Mtpa at least a year by 2014.

As announced earlier in June 2009, the company plans to retain at least 50% equity in the second and third stages of its Pluto LNG development.

The company, in May 2009, secured a $1.1 billion syndicated loan facility, mostly from Asian banks, to help fund the construction of its Pluto LNG project.

It may be recalled that in May 2009, the company signed a non-binding letter with Apache Northwest Pty Ltd (Apache) and Kufpec Australia Pty Ltd setting out key principles to ease negotiation on a non-exclusive basis of definitive agreements for the sale of gas from the Julimar and Brunello fields located in permit WA-356-P, operated by Apache, through its Pluto LNG Train 2 at Karratha.

The Pluto LNG project, approved for development in July 2007, will process gas from two offshore fields named as Pluto and Xena. The Pluto gas field, discovered in April 2005, is located about 190km north-west of Karratha in exploration permit WA-350-P. Water depth at the field ranges from about 400 metres to about 1 km. The field is estimated to contain 4.4 tcf of dry gas. Xena gas field, discovered in the same permit, has an estimated 0.6 tcf of dry gas. Both the fields are located in the Carnarvon Basin.

The initial phase of the Pluto LNG Project comprises an offshore platform in 85 m of water, connected to five subsea wells on the Pluto gas field. Gas will be piped in a 180 km trunkline to the onshore facility, located between the North West Shelf Venture and Dampier Port on the Burrup Peninsula. The initial LNG plant will have production capacity of five to six million tones a year.

Onshore facilities include a single LNG processing train with forecast production capacity of 4.3 million tones a year (mtpa), in addition to storage facilities and an export jetty. The LNG train is being built in Thailand and shipped to site in 264 modules and supporting structures. Storage and loading facilities at the plant include two LNG tanks with a combined capacity of 120,000 m³, three smaller condensate tanks and an LNG and condensate export jetty.

The total area of the Pluto leases for the onshore facility is about 200 ha, of which the plant and associated infrastructure will cover about 80 ha.

The company expects to complete at least 20 wells in the surrounding region by late 2010. Already the company has identified about 39 major prospects in five “hubs” around Pluto in which it is confident of finding trillions of cubic feet of new gas reserves.

The Pluto LNG Project is underpinned by 15 year sales contracts for up to 3.75 mtpa with foundation customers and partners Kansai Electric and Tokyo Gas who each hold a 5% equity interest in the foundation project. Woodside Petroleum is the operator of the Pluto project holding 90%.

Woodside Petroleum has developed six of Australia’s seven LNG developments but Chevron Corporation (Chevron) is set to gain greater market share with its proposed Gorgon and Wheatstone LNG projects. The company expects that its future LNG output would exceed Chevron if it retained 90% equity in Pluto Train 1 and 50% in the second and third trains.