Woodside's next CEO must steer costly LNG projects through glut risk

By Emily Chow and Helen Clark

SINGAPORE/PERTH, Dec 18 (Reuters) - ⁠Woodside Energy faces a ⁠leadership shake-up after ‍chief executive Meg O'Neill's surprise exit for the top job at BP, a move that comes as the Australian firm is striving to deliver key projects in a market braced for oversupply.

The oil and gas producer is expected to ‍press on with its global growth strategy, analysts say, requiring sustained investment in new assets and continuity in ​mature fields. Advancing its Louisiana LNG project will be crucial after project delays and escalating costs in the sector.

"The key project for Woodside will be the $17.5 billion Louisiana LNG ​project. The new CEO will need to manage construction risk," said Joshua Runciman, analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).

"More broadly, Woodside will need to find buyers for its LNG in a market that is seeing the first signs of a supply glut. Uncertain LNG demand growth may ​compound this challenge."

Woodside shares, which have underperformed larger global energy rivals in the past five years, fell 2.65% on Thursday after news of O'Neill's departure.

In a strategic move into the North American market, Woodside acquired Tellurian and its Louisiana LNG project for $1.2 billion and is ​seeking more equity partners to reduce capital spending risks, with a target of 50% overall ownership. It is also seeking supply offtakers for the project.

Domestically, the new CEO will also have ‌to ensure its local gas supply. Woodside has faced criticism for undersupplying Western Australia, where a 15% reservation policy applies, with large-scale users alleging underdelivery from its Pluto LNG project.

Woodside's western projects include the Scarborough Energy ​Project and the Browse gas project to supply the North West Shelf LNG ⁠plant.

"They will have to progress Browse off the western Australian coast, not only because of sustained LNG demand in legacy markets Japan, South Korea and Taiwan, but also because the domestic market is running out of ‌options," said Kaushal Ramesh, vice president at consultancy Rystad Energy.

"Gas demand here is only going up."

Further out is the Timor LNG project.

Last month, East Timor and Woodside announced another study into sending gas to the small nation in a greenfield 5 million metric ton development. Dili has been adamant it will not accept ‌gas going to Darwin, Australia. It was the first time the pair suggested a start date, which could be as soon as 2032.

SUCCESSION RISKS

The company's next chief ‌executive is widely expected to be an internal candidate, with analysts naming Woodside's acting CEO Liz Westcott, chief commercial officer Mark Abbotsford and CFO Graham Tiver as potential candidates.

O'Neill exits at a delicate time, before Scarborough ships its first LNG cargo next year and as Woodside seeks more equity stake sales for Louisiana ‍LNG.

"There could be an accountability vacuum for these targets now," said Saul Kavonic, head of energy research at MST Marquee.

"Maintaining continuity of high-level relationships with current and potential selldown partners, joint venture partners, customers and contractors ⁠is very important."

GLOBAL SUPPLY GLUT

Woodside's incoming CEO will contend with an anticipated global LNG supply glut toward the 2030s, as more North American supply comes online and as Qatar ramps up its North Field Expansion, potentially pressuring LNG prices and project returns.

"The broader challenge for Woodside's new CEO will be managing price risks and the potential impacts on free cash flow and shareholder returns," said IEEFA's Runciman.

(Reporting by Emily Chow in Singapore and Helen Clark in Perth, Editing by Tony Munroe and Elaine Hardcastle)

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