Woodside Petroleum has de-risked its massive Browse Basin joint venture by selling a $2 billion, 15 per cent stake in the project to its North West Shelf partners, a Japanese consortium of Mitsui & Co and Mitsubishi Corporation, in a deal which includes a lucrative offtake agreement.Assuming Woodside's other Browse joint venture partners - Chevron, Shell, BHP Billiton and BP - waive their pre-emptive rights, the deal will go ahead and the so-called "MIMI" consortium will buy 1.5million tonnes per annum of liquefied natural gas from Woodside, at a price "in line with traditional Asian pricing for conventional LNG projects".

After the sale Woodside's stake in the 12 million tonnes per annum Browse project will fall from 46 per cent to 31.3 per cent, meaning it needs to sign contracts over roughly 3.75 million tonnes of LNG.

Woodside reached key terms with CPC Corporation Taiwan in 2007 to sell 2-3 million tonnes per annum from Browse, and if it can convert that agreement into a binding contract, its share of the Browse gas will be sold. Woodside shares surged $1.28 or 3.7 per cent to close at $36.20, reflecting the generally better-than-expected sale price to MIMI and higher confidence that the Browse joint venture would go ahead.

Some analysts speculated it was now more probable the Browse gas would not be processed at a new $30billion-plus hub at the controversial James Price Point north of Broome on the Kimberley Coast, but would be piped about 900 kilometres south to the existing North West Shelf plant at Karratha, which is split equally by the same six partners and which could run out of gas around the end of this decade.

RBC Capital Markets analyst Andrew Williams said the Browse joint venture now looked "exactly like the North West Shelf" and the MIMI deal would shift towards a brownfields development option which was "always going to be cheaper".

But Western Australian Premier Colin Barnett said the deal was a "vote of confidence in James Price Point, and progress of the Browse LNG project". A Woodside spokeswoman said James Price Point remained the base case for the Browse development, which was well into a front-end engineering and design process (FEED) to which the partners had committed $1.25 billion.

Woodside had been due to make a final investment decision by mid-this year under the "use it or lose it" provisions of the Browse retention lease. However, the state and federal governments recently allowed a one- year extension to this deadline. Most development projects which pass FEED to go ahead, but the final decision will depend on costs: analysts estimate if a greenfields project would cost $40 billion, it could return roughly 12 per cent, but if it cost $50billion it might return just 10 per cent and become uneconomic.

The proposal for a multi-user gas hub at James Price Point has been divisive, including within the Aboriginal community, and Wilderness Society campaigner Heidi Nore warned yesterday the Japanese consortium had bought into "Australia's biggest environmental battle".

Woodside holds its annual meeting in Perth today. It is the first for chief executive Peter Coleman, who was appointed at the end of May last year.

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