Woodside makes final investment decision on Mexico's Trion project

Woodside Energy announced its final investment decision to develop the Trion resource - a large and high-quality oil and gas field located in Mexico - on Tuesday.

The firm said the decision was based on the project's potential to exceed Woodside's capital allocation framework targets and provide long-term value to shareholders.

It said it was targeting first oil production by 2028.

However, the development of the Trion resource is subject to approval from the joint venture partners and regulatory authorities.

Woodside Energy, as the operator, holds a 60% participating interest in the project, while PEMEX Exploración y Producción (PEMEX) holds the remaining 40%.

The estimated total capital expenditure for the project stood at approximately $7.2bn, with Woodside's share amounting to $4.8bn, including a capital carry of approximately $460m for PEMEX.

Woodside said it expected the development to generate strong returns for its shareholders and bring significant economic and social benefits to Mexico.

The company said it was anticipating an internal rate of return of over 16%, and a payback period of less than four years.

Those figures exclude the capital carry with the forecast internal rate of return, excluding the capital carry, standing at greater than 19%.

Woodside said the Trion resource was estimated to hold around 479 million barrels of oil equivalent of best estimate (2C) contingent resource, with its net economic interest amounting to 287 million equivalent barrels.

The field had been extensively appraised, with six well penetrations providing valuable insights into the reservoir and confirming its significant potential.

To develop the Trion resource, Woodside said it was planning to use a floating production unit (FPU) with a production capacity of 100,000 barrels of oil per day.

The FPU would be connected to a floating storage and offloading (FSO) vessel with a storage capacity of 950,000 barrels of oil.

Woodside said the infrastructure would enable efficient and cost-effective production and storage of the extracted oil.

“Trion is a valuable resource with a mature development concept,” said chief executive officer Meg O'Neill.

“Our strong balance sheet and disciplined approach enable us to invest in opportunities such as Trion, expanding our global portfolio and delivering long-term value.

“The investment is aligned with Woodside's strategy, exceeds Woodside's capital allocation framework targets and will be a strong contributor to Woodside's cash flows, shareholder returns and the funding of future developments in oil, gas and new energy.”

O'Neill said the development was leveraging Woodside's proven expertise in deepwater project execution.

“The project's tendering process has resulted in approximately 70% of total forecast capital expenditure as lump sum or fixed rates, with key contracts to be progressively executed following joint venture approval.

“Trion has an expected carbon intensity of 11.8 kilograms of carbon dioxide per barrel of oil equivalent average over the life of the field, which is lower than the global deepwater oil average, and will be subject to Woodside's corporate net equity Scope 1 and 2 emissions reduction targets.

“We have considered a range of oil demand forecasts and believe Trion can help satisfy the world's energy requirements.”

Two-thirds of the Trion resource was expected to be produced within the first 10 years after start-up, Meg O'Neill explained.

“We are developing Trion because we believe it will deliver value for Woodside shareholders and benefit for Mexico, including generation of jobs, taxation revenue and social benefit.

“We value the ongoing relationship with PEMEX and the support of the Mexican Government and regulators.”

At 0923 BST, shares in Woodside Energy were up 2.22% at 1,933p.

Reporting by Josh White for Sharecast.com.