Woodside Petroleum agreed on Tuesday to sell its 14.7 per cent stake in the Browse gas fields to its Japanese partners for $2 billion. However, the sale to Mitsubishi and Mitsui would likely place a question mark if Mitsubishi and Mitsui would build the liquefied natural gas (LNG) plant at James Price Point.

The sale reduces Woodside's share in the Browse venture to 31.3 per cent from 46 per cent. News of the sale caused Woodside's shares to rise 3.41 per cent to $36.11.

Woodside Chief Executive Peter Coleman said the company is reducing its holding in potential LNG developments to free up more development cash and cut project risk. Most of the joint venture partners of Browse have been pushing for piping the gas further south to the existing North West Shelf plant at Karratha when reserves run low towards the end of 2020.

The other Browse partners include the company Japan Australia, which owns one sixth of the North West Shelf, and agreed to buy from Woodside 1.5 million tonnes of LNG a year from the Browse development. Japan Australia is the subsidiary of Mitsubishi and Mitsui.

The Browse project has a gross valuation of $13.6 billion. Macquarie Group analysts said that amount is 35 per cent ahead of their estimates. As investors accepted the implied value of the deal on Browse, Woodside shares went up 4 per cent at early trading in Sydney.

"Browse is a world-class resource and the level of interests shown during this process reflects the strong ongoing demand for LNG from premium developments such as this," Mr Coleman said in a statement.

Browse is estimated to have 15.5 trillion cubic feet of recoverable gas and more volumes of condensate. Woodside aims to make its first shipment of LNG in 2017. It is designed to produce 12 million metric tonnes of fuel a year from three processing units called trains.

The venture, however, is being opposed by environmental groups and traditional land owners. The joint venture partners are also in disagreement on the best methods to process the gas for export.

The federal government and Western Australia threatened in late 2009 t00 remove the retention leases of the joint venture over the gas resources if the companies do not agree to develop the fields as quickly as possible.

While Woodside is in favour of the development of a new LNG facility at James Price Point on the WA coast, some of its partners such as BHP and Chevron would rather pipe the gas to the existing North West Shelf LNG project.

"This deal will do little to discourage the market that Browse gas could ultimately be taken back to the North West Shelf.... While this development option adds little to the net asset value, as a cheaper development it considerably lowers the breakeven oil price and therefore is less risky," The Wall Street Journal quoted Macquarie analysts.

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