Woodside Explains Benefits of Vanguard Trion Field Ahead of FID

Q: What is behind the historic merger of BHP Petroleum and Woodside Energy?

A: Merging Woodside with BHP’s oil and gas business has delivered a stronger balance sheet, increased cash flow and enduring financial strength to fund planned short-term developments and new energy sources in the future. Due to the merger, Woodside is the largest energy company listed on the Australian Stock Exchange (ASX). We are now a global company with a truly international footprint and secondary listings on the London Stock Exchange (LSE) and New York Stock Exchange (NYSE). Our larger, more diversified portfolio is expected to deliver significant cash flow to help fund growth, Woodside’s participation in the energy transition and shareholder returns.

Q: After the merger, what are Woodside’s key business priorities and biggest strengths?

A: The proven capabilities of both heritage organizations will deliver long-term value through our geographically diverse and balanced portfolio of high-value operating assets and low-cost and lower-carbon growth opportunities. Key business priorities include delivering reliable production, executing our commitments on major projects, investing in growth and delivering merger synergies. Our performance from the first full quarter following the merger has demonstrated that the new, expanded Woodside is delivering what we promised: safe, reliable energy from a more diverse portfolio. 

Q: Where does Mexico fit into Woodside’s oil and gas portfolio?

A: Diversity and scale in our commodity portfolio are important. We are managing a strong portfolio of growth projects in execution but we are always looking at other opportunities to grow our business. Mexico is one of these prospects as a major oil and gas-producing country with future growth potential, possibly in deepwater developments. 

Our 2017 acquisition of 60 percent equity and operatorship in Trion was our first step into the country. Trion is a large oil field in the Perdido Fold Belt that has the potential to generate value for Woodside, PEMEX and Mexico. We have demonstrated our capabilities in deepwater developments and we are committed to sharing our experience with the relevant Mexican stakeholders. We could be a partner of choice for the right future investment opportunities here.

Like any other investment opportunity in our portfolio, Trion needs to be competitive and meet investment targets. Confidence in the reservoir characterization and assumptions, stability in the fiscal and regulatory regime, along with cost and schedule predictability are key parameters for us to consider before making an investment of this magnitude. 

Over the next few months, we will continue the investment assessment with our partner in preparation for a final investment decision (FID) in 2023.

Q: What are the most important recent developments that have taken place at the Trion project?

A: We completed our appraisal program and issued the Declaration of Commercial Discovery (DoC) to CNH in December 2021. In parallel, we completed our Front-End Engineering Design (FEED) work in June 2022 to further mature and de-risk the development. We are now actively engaging with the market and key contractors through competitive tendering to confirm our cost and schedule assumptions in preparation for the FID. Our plan is also to submit the first Mexican ultra-deepwater Field Development Plan to CNH in 2023. 

Q: What would be the legacy of Trion, independently from the remaining path to the FID announcement in 1H23?

A: Trion, being the first ultra-deepwater project in Mexico, is key to unlocking deepwater oil and gas activity and promoting the development of Mexico’s energy sector. Successful delivery of the project and first production from the field would increase national oil production and provide benefits to the community where we operate as well as the people of Mexico through the 30-year life of the field. Our goal is to create value for our company, PEMEX and to leave a lasting legacy in Mexico. We appreciate and accept the challenges to achieving our objective and we genuinely believe that we have built a good foundation for being successful in Mexico since 2016. Furthermore, we are committed to transferring our technology and development capabilities to support the Mexican deepwater industry in the future. 

Q: Where does a project like Trion fit into Woodside’s stated goal of net zero by 2050?

A: Our climate strategy is an integral part of the company’s overall strategy. It has two key elements: reducing our net equity Scope 1 and 2 greenhouse gas emissions and investing in the products and services that our customers need as they reduce their emissions. The Scope 1 and 2 greenhouse gas emissions from projects, including Trion, need to be managed to meet our net-equity emissions reduction target of 30 percent by 2030 and a net-zero aspiration by 2050 or sooner. We have three ways to achieve Scope 1 and 2 targets: avoiding emissions through design, reducing them through efficient operations and offsetting the remainder.

By using new technologies and optimizing operating practices, Trion’s carbon emissions intensity is expected to be lower than the industry average for this type of deepwater development. We are proud of this and will continue to optimize our design and operations to further reduce our emissions going forward. 

Q: What are some of the added difficulties of greenfield development in deepwater?

A: Delivering a deepwater development is a complex undertaking and therefore takes more time to achieve first production as compared to onshore or shallow-water development. The complexity of such investment has been compounded by pandemic-related supply chain issues and the current geopolitical challenges that drive a high level of volatility in commodity prices as well as in the cost and delivery time of goods and services. While some of these elements are outside our control, we are focused on providing cost and schedule predictability through our contracting strategies and by engaging with the market to find beneficial solutions for all involved.

Q: What has been Woodside’s contracting strategy and FPU tendering plan?

A: First and foremost, our contracting strategy is driven by our Joint Operating Agreement requirement and strict compliance with Mexican procurement guidelines. As a result, all scopes of work are competitively tendered to the market. Before issuing the tender package, we publish an Expression of Interest, giving all companies a chance to be evaluated for the bidding process based on their capabilities and experience. All contractor selection and contract awards are jointly approved by Woodside and PEMEX before being executed. Another key element of our strategy is engagement with contractors and the supply chain to define the best execution strategy. 

Regarding the floating production unit (FPU) that would be deployed at Trion, we issued a competitive tender to four companies in August 2022, following the completion of the FEED study work in June 2022. We are expecting commercial and technical proposals in early 2023 and to select a contractor for execution in 2Q23. As the FPU is crucial for the development, receiving high-quality proposals from contractors is critical to support our FID.

Q: How has it been partnering with PEMEX? 

A: Our philosophy is to treat our partners the way we want to be treated and to walk the journey together. We have been truly fortunate to have PEMEX as our partner in Trion and the NOC is very supportive. We have now worked together for more than five years. Our working relationship, based on collaboration, trust and making decisions with the best interest of the investment in mind, is one of the key contributing factors to our success. We value the expertise of the highly qualified and passionate PEMEX team and we are convinced that this project would not have reached this level of readiness without PEMEX’s support.

Mexico is a new country for Woodside and PEMEX has been fundamental in helping us understand and navigate local regulations. In return, we are proud to share our expertise in deepwater. We are also pleased to welcome five PEMEX employees who are being seconded to the Trion project. Having a common goal, delivering Trion and creating value for our respective organizations and Mexico really brings us together and is the foundation of our success.

Q: What is the value of deepwater farm-outs and how important is it to count on the support of the Mexican government?

A: We estimate that between 70 and 75 percent of the revenue generated from the development of Trion would return to the Mexican state in the form of taxes, royalties, contractual fees and PEMEX revenue. 

As we approach the FID, we acknowledge that the Mexican government has been crucial to the successful progress of Trion. Having an open and transparent dialogue with all the key stakeholders has helped the company to overcome the challenges of progressing such a complex investment and development opportunity.

Q: Why was it necessary to develop a Social Value Strategy for Trion and why is it important for Woodside to work closely with the communities wherever it operates?

A: Environmental, social and governance (ESG) performance is integral to our success and we have embedded processes to actively progress community and social performance where we operate. For Trion, this means that we work closely with local stakeholders and communities to build a strong and positive reputation as a safe and reliable operator. We aim to create social value with community contributions that deliver strong social investment projects and build and develop local capabilities. Woodside cares about communities. We aspire to positively impact the communities where we operate through our actions and contributions. Because of this, social investment projects have been developed within the communities of Tampico, Altamira and Ciudad Madero in Tamaulipas, focusing on education, social well-being and economic diversification. 

In collaboration with Teach for Mexico, we have supported educational programs for students and teachers since 2019, including donating 1,000 laptops during the pandemic to help them continue their education, impacting more than 20,000 members of the education community.

We are committed to meeting local content requirements and are working closely with suppliers and contractors to support our future operations, delivering workshops and preparing them to close administrative gaps to comply with the requirements of international energy companies.

We have signed Memoranda of Understanding with local universities, including the University of Tamaulipas, to prepare training and technology transfer programs, deliver seminars and prepare young Mexican engineers to work in the offshore oil and gas industry.

We are working with the United Nations and PEMEX to become the first oil and gas development to align our plans with the Sustainable Development Goals and the UN’s 2030 Agenda.

Woodside is excited to be part of Mexico’s future and to be able to contribute to the sustainable development of the energy sector.

Woodside Energy is an Australian energy company with a global oil and gas portfolio. One of its most important business opportunities in Mexico is the development of the Trion deepwater field, jointly owned with PEMEX.