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Chevron Triples Size of LNG Project After Drilling (Update1)

Bloomberg

 

 

Chevron Triples Size of LNG Project After Drilling (Update1) 

By Angela Macdonald-Smith

July 11 (Bloomberg) — Chevron Corp., the second-biggest U.S. oil company, tripled the size of the proposed Wheatstone liquefied natural gas project in Western Australia after finding more gas in the area.

The project may initially have three LNG production units rather than the originally planned one unit of 5 million metric tons a year, Nicole Hodgson, a Perth-based spokeswoman for Chevron, said today by telephone. Chevron still expects Wheatstone will start production after the delayed Gorgon project, also in Western Australia, she said.

Chevron’s Wheatstone project is one of several rival LNG ventures proposed off Western Australia to meet rising demand for the fuel from Asian utilities seeking cleaner fuels for power generation. Woodside Petroleum Ltd., Inpex Holdings Inc. and Royal Dutch Shell Plc are among companies seeking to develop gas fields to benefit from increasing prices.

The Wheatstone plan “is another bold LNG vision; it’s another ambition for a multi-train LNG development, of which we have several now,” said Mark Greenwood, an oil and gas analyst at JPMorgan Chase & Co. in Sydney. “The one thing we know for sure is, there’s a lot of competition and many of these projects are going to be delayed.”

Perth-based Woodside is seeking additional gas to feed a proposed expansion of its A$12 billion ($11.5 billion) Pluto LNG project, also in Western Australia. Chevron said in March it studied supplying Wheatstone gas into an expansion ofPluto before deciding instead to build a separate standalone venture.

Iago Field

Chevron, based in San Ramon, California, yesterday said it found gas at an appraisal well drilled on the Iago field, which lies adjacent to Wheatstone. The company also drilled two appraisal wells earlier this year at Wheatstone, the results of which are yet to be released, and another is planned by mid- August.

“Over the course of the last few months we’ve been doing a drilling campaign in the area and essentially some additional work with what gas resources Chevron has off the west coast of Australia,” Hodgson said. The company has “determined that we would have enough gas to underpin a multi-train development and also look at the option of bringing in third-party gas,” she said.

The Iago field straddles two license areas, one of which is 100 percent owned by Chevron, while the other is one-third held by Shell. Shell’s Perth-based spokeswoman Anita Harben couldn’t be reached for comment.

Gorgon Accord

Chevron is planning to start engineering and design work for the Wheatstone project in 2009 and has been in discussions with the government on its plans, Hodgson said. The company is also screening suitable sites to build the LNG processing plant and hopes to announce a decision by the year-end, she said.

Chevron can’t estimate when LNG production from Wheatstone may start up, or how much the project may cost, Hodgson said. The company expects to be able to give an updated estimate of the gas at the fields, beyond the 4.5 trillion cubic feet estimate given in March, after Wheatstone-4 is drilled, she said. The estimate as it stands is enough to supply one LNG unit.

The schedule for the Gorgon project, owned 25 percent each by Shell andExxon Mobil Corp., is running ahead of Wheatstone, Hodgson said. Engineering and design work for Gorgon, also 15 million tons a year, is due to complete in mid-2009. The three partners last week renewed a venture agreement for the project for two years and expect to sign equipment and work contracts within the next months, she said. The Greater Gorgon area holds at least 40 trillion cubic feet of gas.

“There’s a lot of activity going on at Gorgon at the moment,” Hodgson said. “Both projects are a priority for Chevron as a company.”

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. Global consumption is set to increase 10 percent a year through 2015, more than five ties the estimated gain in crude-oil demand, Citigroup Inc. said in April.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at[email protected]

Last Updated: July 11, 2008 02:11 EDT

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