Recently the largest publicly listed oil company in the world, ExxonMobil, agreed to sell a 50% stake it had in a Western Australia offshore gas field known as Scarborough at a price of $744 million to Woodside Petroleum. The location of the gas field is in Carnarvon Basin and Woodside Petroleum already had a 25% stake in the field while BHP Billiton also had a 25% interest.
With the divestment ExxonMobil will reduce its risky asset portfolio as well as get an opportunity to concentrate on cheaper natural gas prospects that exist in Mozambique, Papua New Guinea and other offshore fields. The move by ExxonMobil will place the oil major in a better position with regards to improving cash flow.
The divestment is also a win for Woodside it had been trying to convince ExxonMobil to have the gas sent onshore to an LNG plant it owns. Part of the reason ExxonMobil refused is because it is committed to another model – the floating-production model. Woodside will now have more leeway to speed up the project’s development and meet the demand of natural gas in Asia.
However it will not be a cheap affair to develop the project fully as approximately $9.7 billion is required to meet the costs of a pipeline as well as an LNG train.
The agreement between ExxonMobil and Woodside comes in the wake of an analysis report from PVM Oil Associates indicating that shale producers in the United States are going to turn the largest economy in the world into one with the highest influence in the energy markets.
“… 2017 belonged to OPEC after it successfully reasserted its pricing influence over the oil market. This year, however, its production curbs will increasingly have to make do with playing second fiddle to a Texas-sized wave of U.S. shale growth,” wrote a PVM Oil Associates’s oil analyst, Stephen Brennock, in a note.
Since mid-last year the prices of oil have skyrocketed by about 40% and this has largely been due to supply cuts initiated by OPEC in a bid to reduce a glut that was being blamed for low prices. However the increasing crude exports by the United States and a price rally that has turned out to be stronger than expected has threatened to loosen the grip of Saudi Arabia and Russia on prized overseas markets. According to the IEA – International Energy Agency, the United States could overtake Russia and Saudi Arabia as the leading energy producer in the world next year.