As a partner for more than three decades in Australia’s largest oil and gas resource development, BP has a significant non-operated Upstream portfolio there. With BP’s fourth major project of 2017 now on stream, BP Magazine hears from Claire Fitzpatrick, vice president for Upstream in Australia, about the world-class scale North West Shelf Project, new opportunities and why the team’s regional gas strategy is a perfect fit with the wider BP business
BP’s fourth major start-up this year, Persephone, will increase gas production from Australia’s giant North West Shelf Project. Firstly, what’s been the significance of that venture to BP over the years?
The North West Shelf (NWS) Project is the producing asset in the BP Australia upstream portfolio; it is a long-standing position, where we are one of six equal partners. We began producing domestic gas in 1984, with the first shipments of liquefied natural gas (LNG) five years later.
Since it was sanctioned more than three decades ago, we have doubled the resource base – and today it delivers about a third of Western Australia’s domestic gas supply, as well as supplying LNG for export, condensate and liquefied petroleum gas (LPG). It’s a project of world-class scale, comprising four offshore platforms and more than 50 wells, with trunk lines connecting back to onshore facilities at Karratha. About 1,500 kilometres north of Perth, there are five LNG trains (with an annual export capacity of 16.9 million tonnes) and a domestic gas plant (630 terajoules per day). The venture also owns seven LNG carriers and the vessels are managed individually by those partners with shipping businesses, including BP Shipping.
Meanwhile, thanks to additional discoveries over the years, extra quantities of gas are sold separately as they’re not under long-term contract. Those sales involve BP’s integrated supply and trading business as well – so this is an Upstream business that is optimized through BP’s value chain.
What value does the North West Shelf venture generate for BP?
The project is very valuable. While we own one sixth, it produces more than 600 thousand barrels of oil equivalent a year which makes it one of the top five producing projects in BP’s portfolio. There’s a phrase in the industry that ‘big fields get bigger’; that stands true for the North West Shelf. Not only have we doubled the resource base over the years, but we have continued to look for ways to enhance and develop the fields further – as we are doing now with the start-up of Persephone, which will add about eight thousand barrels of oil equivalent per day, net for BP.
Tell us about these latest developments.
New seismic data was obtained in 2003 that identified several exploration opportunities, resulting in a series of three major projects, all of which are tiebacks to existing infrastructure. Persephone is one, Western Flank A began production in 2015, and Western Flank B is scheduled to come online in 2019.
Presumably, given its scale, the North West Shelf project is also significant for Australia as a nation as well?
Certainly. The domestic gas stream supplies Western Australia (WA) directly, while the LNG goes for export, mainly to Japan, but also to customers in China and Korea. The project is a huge driver for the economy, both in employment terms and through tax revenues. Australia looks set to become the largest LNG exporter in the world by 2020 – and the North West Shelf will play its part in that, alongside several new LNG projects around the country. Since first gas production in 1984, the NWS Project participants have paid more than A$26 billion of royalties, excise and taxes on revenues.
BP also has an interest in another very large gas resource there, called Browse. How is that project progressing?
The offshore Browse development is about 425 kilometres north of Broome in WA and is another world-class gas resource that includes three fields. The challenge is finding a way to develop the project so that it is globally competitive. There have been some iterations already – for example, the partners decided last year not to progress with a floating LNG development concept. But, by about 2022-23, the North West Shelf venture will see its production start to decline. There will be capacity in that processing plant and it makes sense to maximise the value of those facilities by sourcing more gas. Previously, if we had considered taking Browse gas back to the North West Shelf for processing, it would have meant shutting in gas from the latter. In the not-too-distant future though, this may become a viable option. But, no formal decision has been taken yet.
How does Australia’s upstream strategy fit into that of the wider BP group?
Our portfolio here is a great example of BP’s strategy in action, with its shift towards gas and advantaged oil. The North West Shelf also produces some oil, through a floating, production, storage and offloading (FPSO) vessel. We are participating in exploration activity offshore WA, looking to identify more advantaged gas for the NWS, while we’re also monitoring permits and acreage for potential low-cost standalone oil developments. Everything we’re doing here is aligned with the wider BP strategy, and we already have well-established businesses in this area.
BP’s Upstream interests in Australia are all non-operated joint ventures. What does the business contribute to those partnerships?
It’s a different model when you are not the operator of an asset, but you’re in a unique position to achieve value through influence. A partner can influence very effectively by working in a collaborative – rather than competitive – manner. We have some great examples where we’ve worked with the operator to deliver improvements in safety, efficiency and value. One way to do that is through conversations around any gaps in skillset and knowledge – and considering if we can fill those gaps, usually through a secondment so we can share our perspective and any lessons we’ve learned. Equally, through leveraging subject matter expertise either from our Upstream team in Perth or from the global BP organization, we can help to solve problems and bring our experience from similar situations elsewhere – such as our gas business in Trinidad or Indonesia. It works both ways as well, we can always learn from the operator. When it comes to driving value for the asset, it is far more effective to work collaboratively.
Safety is, of course, our number one priority and that does not matter whether it’s an operated or non-operated asset. Safety is the top priority for the operator as well, so our role is to understand how they are assessing risk and their plans to manage, mitigate or remove those risks. The conversations are very similar to those we’d have within BP, but what we look to do as the non-operator is involve the right knowledge from the wider BP. Again, the ability to share insight and understanding is invaluable.
Last year, BP announced that it would not proceed with drilling in the Great Australian Bight. Why was that the right decision?
It was a very hard decision, made even harder as we were close to the start of drilling. It was the right decision on the basis that our strategy focuses on globally competitive gas and advantaged oil. Even with a successful drilling result, we would not have developed the prospect. Making that investment and waiting for decades to either pursue it or walk away from it, was not the right thing to do. Of course, we recognize the impact that’s had at a state and federal level, as well as on our own teams here in Perth and in the UK. We also recognized that just because the permits no longer competed in our own portfolio did not mean they would not fit with someone else’s strategy. We were pleased that Statoil were still interested in drilling the prospects, so we transferred interests from two of our four permits to them – and the same, vice versa. So now, Statoil has two 100% interest permits, as do we. They are moving forward with their plans to drill, while we’re continuing conversations with the Federal and State governments to exit our two permits.
How, if at all, do you think BP’s decision around the Great Australian Bight might affect future business opportunities in the country?
I don’t believe it will – the Great Australian Bight is frontier exploration that no longer aligns with BP’s strategy. We still view Australia as a great place to have and build a business and, looking beyond the Upstream portfolio, we are the only company that has a footprint across the entire value chain, from exploration to fuel pump, from domestic gas to jet fuel. We have been here for nearly 100 years and the country is an important one in BP’s portfolio across both Upstream and Downstream segments.
What excites you about BP’s Upstream future in Australia?
The future is bright, but it is different. That will be clearly demonstrated in the years to come when the North West Shelf moves from an asset that produces its own gas to becoming a world-class processing facility for other gas producers.
Reaching that goal will represent a huge commercial challenge – and it will also bring a series of technical and operating challenges, as the facilities will need to accommodate different mixes of gas. But, it’s a unique opportunity for the team here to be part of creating something new and different. Add to that, finding a way to develop Browse in an increasingly globally competitive market and progressing exploration activity aligned to our strategy. That’s an exciting set of business challenges for us all to solve.