Woodside and Trinidad have agreed to initial commercial terms for deepwater natural gas, an executive says

According to three sources with knowledge of the discussions, a Woodside executive and a Trinidad and Tobago government official have agreed on an initial commercial agreement for the development of Woodside's Calypso gas deepwater discoveries. This brings the project closer to the final investment decision.

In order to fully utilize its gas processing capability, the Caribbean country is Latin America's biggest LNG exporter. It has pushed producers, particularly those offshore, into accelerating natural gas production. Lack of gas has hampered LNG production and exports in recent years.

The agreement, signed and completed in recent weeks will combine or unitize the two deepwater blocks that Woodside confirmed had 3.5 trillion cubic foot (tcf), of natural gas deposits. This will only preserve the land where the discoveries were discovered, reducing Woodside's costs.

Sources said that the arrangement would reduce Woodside's tax liability, as it would only pay taxes on one block and not two, and Woodside could make many payments upfront, including bonuses.

Kellyanne Lochan confirmed the agreement in its initial form, which included the unitization. She said that the purpose of the unitization was to increase efficiency.

Lochan said, "We're focused on working with our JV (joint-venture) partner to advance the project," on the sidelines of Trinidad Energy Conference in Port of Spain.

Woodside is currently in the design and pre-engineering phase of its Calypso find. The company must finish engineering and design and submit a plan for development before making a final investment decision.

Woodside is the operator of the block and BP holds a 30% stake. The gas, if produced, will be mainly used to super-chill the gas and export it.

(source: Reuters)