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Foreign governments try to woo Woodside Petroleum

The prospect of tens of billions of dollars in cash being spent by oil and gas companies has resulted in international governments pulling out all the stops to woo companies looking at new investments.

East Timor has offered a big sweetener to win over the business, which could provide significant economic growth and employment. Timor-Leste petroleum minister Alfredo Pires has said the country is willing to contribute $800 million towards building a pipeline to support onshore LNG processing from the Sunrise LNG project.

Mr Pires is quoted by the ABC as saying “If the pipeline is an issue we’re able to take up some of the risks by actually investing in the pipeline.” Woodside Petroleum (ASX: WPL) holds a 33% stake in the Sunrise Joint venture along with partners Conoco Phillips (30%) and Shell (26%).

An onshore LNG processing plant would mean more jobs and greater economic benefits for East Timor, but likely a higher cost to the joint venture partners, who reportedly favour a floating LNG production vessel. This is the same situation faced by Woodside with its Browse LNG project off Western Australia.

As Woodside has found out from its Browse project, it’s not just sweeteners being used to try and win business. Western Australia Premier Colin Barnett has previously resorted to threats to pull permits Woodside holds in the Browse basin if it did not proceed with onshore processing at James Price Point, a deal which would grant a $1.5 billion package of benefits, as well as jobs and royalties for the state.

Papua New Guinea has also thrown the door open to increased investment by foreign companies in the country’s rich gas industry where Oil Search  (ASX: OSH) and Santos  (ASX: STO) are currently undertaking the now 90% complete PNG-LNG project.

Foolish takeaway

The Sunrise project is currently on hold while a dispute between the Timor-Leste and Australian governments around the treaty of agreements in the Timor Sea is resolved; however the incentive offers are an encouraging sign that major projects may have additional support going forward.

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Motley Fool contributor Regan Pearson does not own shares in any company mentioned.

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