Woodside Petroleum Ltd. has decided not to move ahead with the proposed Browse LNG onshore development at James Price Point in the north-west of Western Australia.
The Perth-based company, which is operator and owns a 31.3-percent interest in the joint venture project, explained that it was "determined that the development concept does not meet the company's commercial requirements for a positive final investment decision".
Woodside added it would review all alternative ideas with its Browse project joint venture partners, which include Royal Dutch Shell plc, BP plc, BHP Billiton Ltd. and Japan Australia LNG.
The leading Australian oil and gas company, which had previously estimated the 12 million tonne per annum development could cost in excess of $42.2 billion (AUD $40 billion), has already earmarked possible alternatives for Browse.
These include floating technologies, a pipeline to existing LNG facilities in the Pilbara region of WA or a smaller onshore option at the proposed Browse LNG precinct near James Price Point.
In an interview with analysts at Company Insight, Peter Coleman, chief executive officer at Woodside, said that the escalating cost environment in Australia had been a factor in the decision.
"Unfortunately the cost escalation has been such that the total costs for Browse have resulted in the current development not being commercial," Coleman said.
"Woodside has applied its usual commercial hurdles and we have decided not to proceed with the James Price Point onshore concept for Browse."
The Browse LNG project has been controversial in Australia and strongly opposed by environmental and Indigenous groups.
While acknowledging these hurdles through the approvals process, Coleman maintained that these issues had no bearing on the decision to halt development.
"The decision is a commercial one," Coleman told Company Insight.
"While we have seen an increase in both the environmental and administrative compliance requirements and procedures, Woodside is committed to the very highest standards in those areas."
The decision "is driven by commercial risk and reward consideration and the proposed concept doesn't provide the economic return required to proceed with the project."