22 Nov

BHP approves Phase 1 of the Scarborough Project

NEWS RELEASE Release Time IMMEDIATE Date 2 2 November 2021 Release Number 29 /21 BHP approves Phase 1 of the Scarborough Project Further to the announcement today that BHP Group ( BHP ) and Woodside Petroleum Ltd ( Woodside ) have entered into a share sale agreement to merge their respective oil and gas portfolios, BHP has approved US$1.5 billion in capital expenditure for development of the Scarborough upstream project located in the North Carnarvon Basin, Western Australia. F inal investment decisions have also been made by Woodside and the Scarborough Joint Venture. A US$150 million payment is payable to BHP Petroleum ( North West Shelf ) Pty Ltd by Woodside upon this Financial Investment Decision ( FID ) of the Scarborough project pursuant to the 2016 divestment of BHP’s 25 per cent Scarborough Joi nt Venture interest to Woodside 1 . The approved capital expenditure represents BHP’s 26.5 per cent par ticipating interest in Phase 1 of the upstream development. Woodside holds the remaining 73.5 per cent interest and is the operator of the project. The development of the Scarborough field (WA - 61 - L and WA - 62 - L titles) comprises 13 subsea wells, a semi - sub mersible Floating Production Unit and a 43 0 km subsea export pipeline to the Woodside operated Pluto LNG Facility in Karratha in Western Australia. Field development will be completed in two phases with eight wells drilled in Phase 1. The upstream productio n facilities will be installed to supply 8 Mtpa LNG and 1 8 0 TJ/day of domestic gas , with f irst cargo expected in the 2026 calendar year. LNG and domestic gas will be processed onshore under a Processing and Services Agreement ( PSA ) executed today by the Scarborough and Pluto Train 2 Joint Venture Participants , which provides long term access to existing and planned Pluto LNG processing facilities operated by Woodside. The PSA is subject to conditions precedent including regulatory approvals. Scarborough via Pluto will be one of the lowes t carbon emissi o n s intensity g lobal LNG projects projected to be in production in 2030 and will have the lowest carbon emissions intensity of an Australia n originated LNG project at around 0.5 tonnes CO 2 per tonne of LNG 2 . The project will minimise its greenhouse gas footprint through development of low CO 2 reservoir fluids coupled with energy efficient LNG processing, in close proximity to the end market – meeting market demand at lowe r emissions intensity. Phase 1 of the Scarborough upstream project was approved by BHP following a thorough evaluation of its risk and return metrics , including the economics and technical assessment of the integrated project , under BHP’s Capital Allocation Framework and seeks to create long - term, sustainable value and returns for shareholders. 1 I f the proposed merger with Woodside completes, the US $150m FID payment would be included in the net cash flow that accrues to Woodside from the merger effective date of 1 J uly 2021. 2 Represents CO 2 associated with p roduction, l iquefaction and s hipping . On completion of the proposed merger, BHP shareholders will be nefit from exposure to the fully integrated value chain of both the upstream project and the downstream Pluto LNG processing facilities due to their approximate 48 per cent shareholding in Woodside . T he integrated project offers stable returns with a n unlevered IRR of 1 3 per cent 3 , a payback of approximately six years from first production 4 and a low breakeven LNG price of less than US$ 7 / MMbtu 5 . The integrated project will benefit from the brownfield expansion of the existing downstream Pluto LNG processing facilities. BHP CEO Mike Henry said: “Scarborough will be amongst the lowest carbon incremental sources of LNG to worl d markets . “Scarborough will provide a reliable source of LNG for global customers and secure gas supply for the domestic market, as well as ongoing e mployment in Western Australia. “ Scarborough will provide important cash flows and value for shareholders of the enlarged Woodside . ” In addition to the approval of the Scarborough development announced today , BHP also holds an option for it to sell its 26.5 per cent interest in the Scarborough Joint Venture and its 50 per cent interest in the Thebe and Jupiter Joint Ventures to Woodside if the Scarborough Joint Venture makes a FID for the Scarborough project by 15 Decem ber 2021 and the merger does not complete. This option is exercisable by BHP in the second half of the 2022 calendar year. If exercised, consideration of US$1 billion is payable to BHP with adjustment from an effective date of 1 July 2021. The US $ 150 mill i on payment payable to BHP Petroleum upon FID of the Scarborough project would remain with BHP Petroleum. A n additional US$100 million is payable contingent upon a future FID for a Thebe Development. 3 Based on BHP resource assumptions and does not account for Pluto train 2 sell down or send or pay co ntractual arrangements; nominal IRR . 4 Based on Wood Mackenzie’s most recent long - term gas price forecast of Japan LNG DES price (20 26 - 20 35 average: US$ 8.35 /MMBtu, real 20 21 ). 5 Integrated LNG DES North Asia. At 10% discount rate. Further information on BHP can be found at: bhp.com Authorised for lodgement by: Stefanie Wilkinson Group Company Secretary Media R elations Email: media.relations@bhp.com Investor R elations Email: investor.relations@bhp.com Australia and Asia Gabrielle Notley Tel: +61 3 9609 3830 Mobile: +61 411 071 715 Europe, Middle East and Africa Neil Burrows T el: +44 20 7802 7484 Mobile: +44 7786 661 683 America s Judy Dane Tel: +1 713 961 8283 Mobile: +1 713 299 5342 Australia and Asia Dinesh Bishop Mobile: +61 407 033 909 Europe, Middle East and Africa James Bell Tel: +44 2078 027 144 Mobile: +44 7961 636 432 Americas Brian Massey Tel: +1 713 296 7919 Mobile: +1 832 870 7677 BHP Group Limited ABN 49 004 028 077 LEI WZE1WSENV6JSZFK0JC28 Registered in Australia Registered Office: Level 18, 171 Collins Street Melbourne Victoria 3000 Australia Tel +61 1300 55 4757 Fax +61 3 9609 3015 BHP Group plc Registration number 3196209 LEI 549300C116EOWV835768 Registered in England and Wales Registered Office: Nova South, 160 Victoria Street London SW1E 5LB United Kingdom Tel +44 20 7802 4000 Fax +44 20 7802 4111 Members of the BHP Group which is headquartered in Australia Follow us on social media
Information on this Website is provided for general information purposes only and is not a substitute for professional advice. ASX Information (including company announcements and prices) is delayed by at least 20 minutes. JSE Information (including company announcements and prices) is delayed by at least 15 minutes. Reliance on the information you access on or from this Website is solely at your own risk. We make no representation or warranty in relation to the future performance of the companies that appear on this Website. Investment in securities involves risk and you should obtain independent professional legal, financial, investment or company advice before acting on any of the information you access on this Website. Using, browsing or otherwise accessing this Website is subject to our Terms and Conditions and our Privacy Policy.

© 2021 Listcorp. ABN 60 166 140 307

Never miss news from BHP Group Limited (ASX:BHP) when you join Listcorp.