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Lloyds List: Gorgon price tag threatens gas project

Martyn Wingrove, Lloyds List
Published: Aug 17, 2007

CHEVRON’s Greater Gorgon liquefied natural gas project in Western Australia may be delayed or even postponed because development costs could be too high, writes Martyn Wingrove.

Chevron’s partner in the project, US major ExxonMobil, is reported to have said the project plan, which involves building a double train plant on Barrow Island off the Australian coast, is too expensive.

The two US oil companies and partner Royal Dutch Shell are thought to be considering moving the plant to an onshore location.

Any change in their plans will delay the project and ultimately LNG exports from one of Australia’s largest future gas projects.

Analysts at investment bank Credit Suisse said ExxonMobil’s chief executive Rex Tillerson told them the partners were not willing to move ahead with the Greater Gorgon project at present cost levels. ‘All aspects of Gorgon are being looked at, including moving the site from Barrow Island to onshore,’ said Credit Suisse analysts Mark Flannery and Edward Westlake in a note to clients.

Mr Tillerson spoke to analysts for 90 minutes in New York and commented on other projects and issues including interest in Arctic exploration, project costs on the giant Kashagan oil project in Kazakhstan and his company’s recent exit from Venezuela.

‘We may know more by the end of the year, but all partners are agreed it cannot go ahead at current cost levels,’ said the analysts.

ExxonMobil, Chevron and Shell are reviewing the costs on what was a A$11bn ($9.2bn) project that also involved developing several offshore gas fields in shallow and deep waters with subsea wells tied back to the Barrow Island plant.

It is thought the partners are also considering increasing the size of the plant by adding a third train to boost capacity from 10m tonnes annual capacity to 15m tonnes. This would be possible if an onshore location was chosen.

‘In Greater Gorgon we have a 25% interest and our Janz field is part of the whole Gorgon project,’ said an ExxonMobil spokesman. ‘The Credit Suisse report has inaccuracies and speculation that we will not comment on.’

Construction costs for both import and export LNG facilities have doubled in price in the past four years and oilfield costs have massively increased as contractors have capitalised on strong demand and high energy prices.

As one Australian LNG project is delayed another is boosted by a successful offshore well.

Development of the deepwater Scarborough gas field, operated by ExxonMobil, has moved a step forward after BHP Billiton discovered a new gas resource close by with the Thebe exploration well. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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