Royal Dutch Shell Plc  .com Rotating Header Image

Lloyds List: Gorgon LNG project clears another hurdle

Tony Gray, Lloyds List
Published: Sep 10, 2007

MOMENTUM is building behind Australia’s massive, but troubled, Gorgon liquefied natural gas project.

Operator Chevron said Gorgon had received final approval from the Western Australian state government, removing a major hurdle, and key Japanese customers were considering taking an equity stake in the project.

The news came just days after Gorgon’s partner Shell disclosed it had concluded a binding heads of agreement with Petro-China International, covering the supply of 1m tonnes of LNG a year over 20 years.

Jay Johnson, managing director of Chevron’s Australian unit, said the Western Australian government’s conditions on the approval were acceptable, although the company had yet to build them into its cost projection.

He said it was is too early to predict the cost of developing the LNG project, based on gas fields off the coast of northwestern Australia.

The state issued a set of ‘stringent’ environmental conditions for the project, which would be located on remote Barrow Island. One of the 36 conditions stipulates that the Gorgon project establishes a reservoir for a carbon dioxide re-injection system as well as expert panels to protect the biodiversity of the island and surrounding marine environment.

Gorgon still needs Australian national government approval before the project can go ahead.

Chevron also said Japanese companies Tokyo Gas, Chubu Electric Power and Osaka Gas could take minority equity positions in the Gorgon project.

‘We are working with three Japanese customers and there are provisions for equity participation as well as the purchase of LNG (from Gorgon),’ Mr Johnson said.

He added that the partners, who also include ExxonMobil, remained committed to the project.

‘The final investment decision is one which each company has to take,’ Mr Johnson said.

‘But I can say that we have a common set of interests and we are well aligned going forward.’

ExxonMobil chief executive Rex Tillerson was recently reported to have said the project could not go ahead at present cost levels and that the partners were examining ways of reducing unit costs.

Industry analysts have also suggested that Gorgon’s construction costs could have doubled to A$20bn ($15.8bn) from the A$11bn estimated three years ago.

The project is based on the development of the Greater Gorgon gas fields, which contain resources of about 40trn cu ft of gas, Australia’s largest known undeveloped gas resource.

There have been reports that partners could increase the scale of the project to 15 m tonnes a year from the initial plan of 10m tonnes.

But Chevron said that optimisation studies were still continuing and the scope of the project remained unchanged.

Chevron holds a 50% stake. ExxonMobil and Shell each have 25%.

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 “Lloyds List: Gorgon LNG project clears another hurdle”

Leave a Comment

%d bloggers like this: