WPL Woodside Petroleum Limited

MELBOURNE, Australia—Woodside Petroleum Ltd. has shelved proposals for a floating gas-export operation off Australia's west coast due to belt-tightening and the slump in oil prices.

The Australian company on Wednesday said the partners in the Browse venture have decided not to push ahead with development of the floating liquefied natural gas project at this time, given the current economic and market environment.

The project had already been delayed several times and Woodside Chief Executive Peter Coleman in February told investors it wasn't the time to be "reckless" with capital or to make bets on the future being rosier simply because people wanted it to be.

Still, the decision is likely to reinforce investor and analyst concerns about Woodside's efforts to lift production and reserves without output from Browse. In 2014, Woodside abandoned a planned US$2.5 billion investment in the Leviathan natural-gas discovery off Israel's coast.

Australia has been an epicenter of gas development in recent years, with more than US$200 billion committed to vast projects to chill and ship natural gas, setting it up to overtake Qatar as the world's leading LNG exporter. The planned Browse project promised a further wave of gas exports targeting Asia, despite the current raft of projects now beginning production having been hit by cost overruns, delays and falling prices.

On Wednesday, Mr. Coleman said Woodside remained committed to the earliest commercial development of the Browse resource and to floating LNG technology but the economic environment didn't support investment in a major LNG project at this time.

"We will use the additional time to pursue further capital efficiencies for Browse," he said.

The Browse project sits on an estimated resource of 15.4 trillion cubic feet of dry gas, plus 453 million barrels of condensate, in a basin about 425 kilometers north of Broome in Western Australia. Woodside and partners in late 2013 decided to push ahead with unproven floating technology and undersea development to produce LNG and in the middle of last year agreed on the front-end engineering and design phase of the project.

Woodside has an almost 31% stake in the Browse venture, while Royal Dutch Shell PLC has a 27% interest and BP PLC a little over 17%. The other partners include Japan Australia LNG and PetroChina Co.

International energy companies have placed large bets on Australia's gas fields and proximity to Asian markets in recent years. The US$54 billion Gorgon project off Western Australia led by Chevron Corp. recently began pumping LNG and shipped its first cargo on Monday. That comes on the heels of initial exports from other multibillion-dollar projects over the past year involving BG Group PLC, France's Total SA, ConocoPhillips and others. Chevron recently pushed back the forecast for first gas from its Wheatstone LNG project in Western Australia to mid-2017 from later this year.

Mr. Coleman said Woodside planned to work with the Browse partners on a new work program and budget for the development, leveraging the work done to date. The retention leases for the Browse project were renewed last year and are due to expire in mid-2020.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

March 22, 2016 20:25 ET (00:25 GMT)

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