Woodside Petroleum : Speech - CEO Speech at Gastech 2018

Peter Coleman

CEO and Managing Director Woodside Energy Ltd.

Gastech, Barcelona

Monday, 17thSeptember, 2018

[check against delivery]

When Gastech was held in Japan in April last year, it was a very different market, characterised by a supply overhang.

It was a lean time for new project sanctions. We knew the era of abundance would not last, but it was challenging to convince buyers that it was time for them to engage again.

The investment hiatus is now over and producers are vying to have new projects ready to deliver gas into an emerging supply gap.

Much has changed since the last investment phase. There have been changes on the supply side, the demand side and in trading arrangements.

Producers are focused on keeping costs low. For Woodside, this involves building an LNG hub in northern Western Australia by leveraging our existing infrastructure to develop new resources and harnessing advances in technology to improve our operations.

We continue to pursue advances in conventional oil and gas technologies that can lift production and reduce costs, but we also see great potential for data-drivenbreakthroughs. That's why we're installing a new digital nerve system at our facilities on the Burrup Hub to enable better decision-making and avoid disruptions to operations.

On the demand side, we have seen massive changes. During the downturn in the pricing cycle, new and diverse buyers entered the market, with the strongest growth coming from Asia.

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In a market like China, the significant growth drivers are evident: urbanisation, community demands for improved air quality and a push for cleaner energy driving widespread coal-to-gas switching.

The supply gap is now expected from the early 2020s and that date is only being revised forward. Indeed, we are already seeing signs of the tightness that is to come. We saw it in the surging demand from China during the last northern winter and, more recently, in the Japanese heatwave in July-August.

The price spikes in those periods serve as a timely signpost to buyers that the market has shifted. This was supposed to be a period of relatively weak demand, but supply is already a lot tighter than anticipated-and continues to tighten.

The maturing of LNG trading has brought new liquidity to the market. This is a welcome development, meaning we can get projects away with a lower portion of production pre-sold on long-term contracts because we know demand will be there and the volumes will be sold.

However, as we shift towards a market deficit, it would be foolhardy for buyers to rely too heavily on spot trading and assume that it guarantees future supply. The surge in spot prices during recent peak periods shows just how close to balance the market already is.

Now is the time for buyers to lock in behind projects that will deliver the extra volumes that are needed. The smart buyers are already doing this. Those who move early will have a chance to secure the best position. Those that delay risk getting negotiated out of the best opportunities.

The fact we are all here talking to each other this week is a good sign that all market participants are working to ensure we are in a position to deliver the gas the world needs. ENDS.

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