Lengthy LNG Deal
Pumps New Vigor
Into Gorgon Project
By ALEX WILSON and STEPHEN BELL
September 5, 2007; Page A13A
MELBOURNE, Australia — Royal Dutch Shell PLC signed a provisional agreement to sell liquefied natural gas from the giant Gorgon project off the coast of Western Australia state to PetroChina Co.
The deal is a vote of confidence in the stalled Gorgon project from the Chinese, who are expected to announce more LNG purchase deals in coming days in a move seen as signaling a shift away from Middle Eastern suppliers toward Australian gas.
Shell said the agreement is for the sale of one million metric tons of LNG a year over 20 years and is conditional on the Gorgon partners reaching an expected final investment decision on the project.
The partners in the Gorgon project, which is based on a resource of more than 40 trillion cubic feet of gas, are Chevron Corp., with a 50% stake, alongside Shell and ExxonMobil Corp., with 25% each.
The total budget for the project was originally $8.6 billion, but has since ballooned because of soaring labor and construction costs.
Shell Gas and Power Asia Executive Vice President Jon Chadwick said the Gorgon project is facing cost pressures, but the project partners remain committed to the development. “We feel that what we’ve done today only helps that project proceed — we remain very committed,” he said. “The Gorgon project is of such a size that it needs this kind of long-term arrangement to get it going.”
Mr. Chadwick declined to name the price at which the deal was struck, but said the company is “pleased with the price” and that the LNG market is strong.
A detailed LNG sales and purchase agreement needs to be concluded before December 2008.
Shell already has agreements in place to sell as much as 2.5 million metric tons of gas a year from Gorgon to an LNG receiving terminal in Mexico and as much as 500,000 tons a year to a terminal in India.
–David Winning in Beijing contributed to this article.
Write to Alex Wilson at [email protected] and Stephen Bell at [email protected]
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