Royal Dutch Shell Plc  .com Rotating Header Image

Financial Times: Gorgon LNG project hits ‘green’ hurdle

By Sheila McNulty in Houston, Carola Hoyos in London and Virginia Marsh in Sydney
Published: June 6 2006 01:44 | Last updated: June 6 2006 03:20

An Australian environmental agency on Tuesday dealt Chevron, ExxonMobil and Shell a blow, issuing a report that argues against development of the A$11bn (US$8.3bn) Gorgon liquefied natural gas (LNG) project.
 
The companies have touted Gorgon as a major source of future revenue, and have signed more than A$10bn in contracts to sell LNG from the development to Japan. It is to be the second world-scale LNG project for Australia.

China National Offshore Oil Corporation, which is investing heavily in LNG terminals in southern China, has also hoped to source gas from the project. No contract has been signed, however, because the Beijing-based company is reluctant to pay the prices demanded by the project’s owners.

Yet the West Australian Environmental Protection Agency issued on Tuesday a report concluding potential damage from the project on an environmentally sensitive island is too great to permit its development.

The 3,000-page report concludes that the risks to the terrestrial and marine conservation values of Barrow Island stem from the possible introduction of non-indigenous plants and animals and likely damage from dredging the sea floor.

“There are many potential repercussions of this – to the partners involved, the markets and Asia-Pacific LNG as a whole,’’ said Gary Howorth, senior director of global gas for PFC Energy, the consultancy. “Additionally, with lending banks now looking very hard at sustainable development, this decision could also extend the time frame for securing third-party financing of this or similar proposals.”

Exxon and Shell deferred to Chevron, as Gorgon operator. It remained confident the project to produce 10m tonnes of LNG annually would proceed.

“Final government approval for the Gorgon project will depend on consideration of social, economic and strategic issues, as well as environmental matters,’’ said John Gass, president of Chevron’s global gas group.

“Chevron is confident the project will continue to maintain the appropriate balance between environmental management and industrial development on Barrow Island,’’ he said.

Mr Gass said the final environmental approval decision rests with the Western Australian and Australian governments and is expected at year’s end.

The government is pro-business and the development will reportedly raise Australia’s gross domestic product by $2bn. Yet it also is environmentally sensitive; not only is the island designated a Class A nature reserve, but there are other places to develop. So the decision could go either way.

Frank Harris, co-head of the liquefied natural gas team at Wood Mackenzie, the consulting firm, said the agency’s decision risked delaying the project unless the premier of western Australia overruled the decision quickly.

“What happens next is key. It’s most likely that you’ll get into horse-trading around the document and that could take three to six months.” For the project’s partners, he said, such a delay could reduce the value of their investment.

Additional reporting by Enid Tsui in Hong Kong

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Financial Times: Gorgon LNG project hits ‘green’ hurdle”

Leave a Comment

%d bloggers like this: