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Financial Times: Australia pledges to work with Chevron

By Virginia Marsh in Sydney
Published: June 7 2006 03:00 | Last updated: June 7 2006 03:00

The Australian authorities yesterday pledged to work with Chevron to help it overcome environmental objections to one of the country’s biggest resources projects.
Chevron’s planned A$11bn (US$8.1bn) Gorgon liquefied natural gas project was thrown into doubt yesterday after the environmental protection agency in Western Australia said it was “unacceptable” in its current form.

But Alan Carpenter, the state’s premier, moved quickly to allay business concerns over the agency’s findings, stressing his government would have the final say over whether the high-profile project progressed.

The state’s Labor-run government three years ago over-ruled an earlier EPA recommendation that would have hindered development of Gorgon, in which A$1bn has already been invested.

“We are confident that we can work with the Gorgon partners . . . and come to a satisfactory conclusion,” Mr Carpenter said, adding he believed Gorgon was the most environmentally sensitive LNG project ever undertaken.

The project, which is 50 per cent owned by Chevron and also involves ExxonMobil and Shell, is one of half a dozen LNG projects worth some A$50bn being planned in the state, the heart of Australia’s resources boom.

Due to come on stream after 2010, it would be Australia’s second world-scale LNG project after the North West Shelf, producing 10m tonnes a year.

Chevron last year signed preliminary accords worth an estimated A$28bn to sell its share of the gas to Japan. Shell is planning to sell its 25 per cent share of the gas to India and North America.

Chevron, which immediately said it would appeal against the EPA’s findings, the result of an exhaustive three-year study, also said it was “confident” that a compromise could be reached.

The project, which could provide a third of Australia’s LNG exports at its peak, involves building a processing plant on the Barrow Island nature reserve and burying associated carbon dioxide production deep under the sea.

The EPA raised concerns over the impact of dredging on the marine environment and of risks to indigenous fauna, in particular the flatback turtle.

Chevron has argued that the project would become uneconomical if it were required to pipe the gas to an onshore processing plant.

“The final decision will be finely balanced,” said Aiden Bradley, analyst at ABN Amro in Sydney.

“But the EPA is in a position of strength now and may be able to negotiate what it wants in terms of extra environmental guarantees. It is hard to see Chevron walking away from such a big project.”

“We would see this as a one-off. Gorgon is the most environmentally sensitive of the big LNG projects being planned in Australia,” he added.

Chevron hopes the appeal will be dealt with swiftly so that a final decision could be made on the project by the end of the year.

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