Woodside Petroleum's $US400 million entry to the Scarborough LNG joint venture has reduced the likelihood of an expensive floating LNG platform at the project going ahead, with gas from the remote development more likely to be piped back to existing LNG facilities.

Project partners ExxonMobil and BHP Billiton have won approval from the federal and Western Australian governments to go ahead with early works on Scarborough on the understanding it will be a floating LNG platform, but the project is a low priority for both companies, and BHP's decision to sell half of its stake to Woodside has changed the dynamic within the joint venture.

Woodside will pay $US250 million upfront for a 25 per cent stake in the "WA-1-R" offshore permit and a 50 per cent stake in the "WA-62-R" permit.

Those two remote, deepwater permits contain the Scarborough gas resource, while Woodside will also acquire a 50 per cent stake in two other permits which contain the Thebe and Jupiter gasfields.

Scarborough, Thebe and Jupiter hold a combined 8.7 trillion cubic feet of gas resources, and Woodside's share of that will be 2.6 trillion cubic feet. The deal has an implied cost of $US0.15 per million cubic feet of gas.

The Perth-based oil and gas producer will pay BHP a further $US150 million if a final investment decision to develop Scarborough is ever taken.

Woodside runs an LNG processing "train" on the Pilbara coast called Pluto LNG, owns 16.7 per cent of the North West Shelf and will soon have exposure to a third LNG processing facility at Wheatstone, which is expected to be complete by mid 2017.

Piping the gas back to Pluto or the North West Shelf appear to be the most viable options, particularly given BHP is also a stakeholder in the North West Shelf and was originally keen for Scarborough gas to be piped back there, prior to accepting Exxon's wishes for a floating LNG platform in September 2014.

In his first press conference as Woodside's new chief executive in 2011, Peter Coleman vowed to "bring Scarborough knowledge" to Woodside; a comment that reportedly angered his previous employer, Exxon.

Mr Coleman indicated on Monday that a floating LNG development would remain the official, preferred option for now.

"Woodside is committed to working with the Scarborough JV to ensure the asset is commercialised and retention lease obligations are satisfied. The JV is currently working FLNG as its preferred development option and Woodside supports this work," he said in a statement.

"If the Scarborough JV elects to look at other development options, including an onshore tie-back via Woodside operated infrastructure, then Woodside would offer its support in understanding these opportunities."

Exxon, which has pre-emptive rights over BHP's stake in the two Scarborough permits, could yet trump Woodside's bid, but Credit Suisse analyst Mark Samter said he did not expect it to.

"This is so far down their list of priorities I would be staggered if they did pre-empt," he said.

Mr Samter said linking Scarborough to Pluto, Wheatstone or the North West Shelf would be a logical approach to developing the asset, but he said weak demand for LNG and the challenge of aligning three joint venture partners with different priorities would ensure agreement for such a linkage was hard to come by.

"I think this is a transaction where the chief executive of Woodside in 20 years time might be very glad they did it," he said.

"I don't think it is a bad deal, I just don't think it should change the way we as an equity market now think about Woodside. It doesn't suddenly open up boundless opportunities to expand capacity or extend the life of their assets because you have got unequal interests in various different assets, and an LNG market sitting where it is sitting."

Mr Samter said Woodside still had balance sheet capacity for further deals if required.

Doubts over Browse

Morgans analyst Adrian Prendergast said the Scarborough acquisition raised doubts over the future of the Browse LNG project, which was deferred for a second time earlier this year.

Contrarian investor Allan Gray is the 11th largest shareholder of Woodside, and its energy analyst Suhas Nayak said the acquisition was small in the context of Woodside's annual exploration spend, which was $US436 million in 2015.

"The last couple of deals both show a reasonable level of discipline and if they found more that would be good for shareholders," he said in reference to the Scarborough deal and the recent $US430 million spend on exploration assets in Senegalese waters.

"With ownership interests in three LNG facilities, Woodside would be a natural aggregator of stranded oil and gas assets in that part (offshore Western Australia) of the world."

Mr Nayak said Woodside's ability to make further acquisitions was more constrained by the number of good opportunities on the market, than by its balance sheet.

The Scarborough purchase is the latest in a series of deals attempted by Woodside over the past three years.

The company spent $US430 million in July buying ConocoPhillips' exploration acreage in offshore Senegal, and spent $US2.75 billion on several Apache Energy assets, including its Wheatstone stake, in April 2015.

A $US8 billion bid for Oil Search in 2015 did not come to fruition, while a bid to buy into an Israeli project was also abandoned.

Woodside has also established small presences in Myanmar, Ireland, Cameroon, Gabon, Canada and Morocco in recent years.

Woodside shares closed 43¢ higher at $28.51, while BHP shares closed 49¢ higher at $20.34.

West Texas Intermediate crude was fetching $US44.31 per barrel on Monday.