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Gorgon project wins conditional approval

Financial Times

By Peter Smith in Sydney

Published: April 30 2009 09:07 | Last updated: April 30 2009 09:07

The Chevron-led Gorgon project off Western Australia, one of the world’s largest gas developments, passed a milestone on Thursday when an environmental regulator approved the site’s expansion subject to a number of conditions.

The decision by Australia’s Environmental Protection Authority (EPA) paves the way for Chevron, the US oil group that is 50-per cent owner and operator of Gorgon, to deliver its “final investment decision” in the coming months.

Colin Barnett, premier of Western Australia, has estimated the cost of developing Gorgon at A$50bn, although Chevron has not publicly released a figure.

Mr Barnett has already indicated Gorgon, the largest energy project ever considered in Australia that will employ 6,000 people during its peak construction phase, will proceed given its economic importance to the country.

Chevron’s had been awaiting approval for its revised proposal to add a third 5m tonne per annum liquified natural gas (LNG) train to the original two already approved for Gorgon.

Colin Beckett, an Australian-based Chevron executive, said the EPA’s decision was an important step in the US group’s plans to announce its investment in the second half of 2009.

“We have some work to do to understand and meet the conditions [of the EPA],” Mr Beckett said. “But this is a very positive outcome.”

The EPA said Gorgon’s location on the Barrow Island nature reserve would need to deal sensitively with flatback turtle rookeries and it is also concerned about the impact of dredging and marine infrastructure on the coral habitat.

The Western Australian government in 2007 overruled the EPA’s recommendation that “industry should not be located” on Barrow Island.

The project’s location on the doorstep of Asia is highly attractive as a gateway to serve energy hungry markets in China, Japan and Korea.

“Gorgon has the potential to supply natural gas for the next 40 years,” Mr Beckett said.

Chevron’s partners in the Gorgon venture are ExxonMobil and Royal Dutch Shell, with each owning 25 per cent stakes.

Chevron has signed initial agreements to sell its half share of Gorgon LNG from the first three trains to Japanese utility customers and to GS Caltex, a Chevron joint venture in South Korea.

PetroChina has also said it intends to take LNG from Gorgon.

Chevron said that based on annual production of 15m tonnes of LNG, Gorgon would boost Australia’s gross domestic product by around A$64bn, in net present value terms, over 30 years.

It estimates the Australian government will earn about A$40bn from the project over the same period.

David O’Reilly, Chevron chief executive, has described Gorgon as the group’s top priority for 2009.

The EPA report has a two week public appeal period.

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