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The Wall Street Journal: Australia Approves Huge Gas Project

By RACHEL PANNETT
October 10, 2007 4:47 a.m.

CANBERRA, Australia — The Australian government Wednesday gave a long-awaited green light to the giant Gorgon gas project off the coast of northwestern Australia, clearing the way for the country’s biggest-ever resources project.

The approval allows oil giants Chevron Corp., ExxonMobil Corp. and Royal Dutch Shell PLC to develop a liquefied natural gas plant on Barrow Island off the coast of Western Australia state, but comes with strict conditions to protect the local environment. The plant will produce 10 million metric tons of LNG a year.

“Strict environmental protection measures will be required to protect Commonwealth environment matters, including listed threatened and migratory species and rare vegetation on Barrow Island,” Environment Minister Malcolm Turnbull said.

Mr. Turnbull said Gorgon will inject around 20 billion Australian dollars (US$18 billion) into the Australian economy and create 6,000 jobs over the life of the project.

Project operator Chevron holds a 50% stake in the huge gas field, which is estimated to contain more than 40 trillion cubic feet of gas and has a nominal development life of around 60 years. Partners Exxon Mobil and Royal Dutch Shell each hold 25% stakes.

Gorgon will take 45 months to construct and the first liquid natural gas shipments won’t occur until well into the next decade.

Colin Beckett, Chevron’s Australia general manager, said the minister’s decision was welcome, after four years of “rigorous state and federal assessment.”

Among the Federal government conditions, Gorgon must develop and implement a quarantine management plan to protect threatened species, provide environmental management plans for the operation of the gas field and refining plant, and submit annual environmental performance reports to the Department of the Environment and Water Resources. Gorgon also faces 36 conditions from the Western Australian state government, including a requirement to establish a reservoir for a carbon dioxide re-injection system. The plan includes a commitment by Gorgon to conserve rare flatback turtles and other endangered species.

Chevron has sale agreements in place with Japanese power utilities for a significant proportion of its share of Gorgon liquid natural gas. Shell has an agreement with China for the sale of 1 million tons of Gorgon gas a year over 20 years, and ExxonMobil said this month it is actively marketing gas to potential buyers in the Asia-Pacific region.

Write to Rachel Pannett at [email protected]

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