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Tuesday September 15,2009

By David Craik

OIL giant Royal Dutch Shell hailed a “great milestone” yesterday as it gave the green light to the construction of the world’s biggest liquid natural gas project.

Shell, along with partners Chevron and ExxonMobil, said the much-delayed Gorgon LNG project off the coast of Western Australia would be built at a “lower than expected cost” of $37billion (£22.2billion) as the recent downturn in the industry bit into ­capital costs.

Chevron will hold a 50 per cent stake in the project, which will begin production in 2014 with an annual capacity of about 15million tonnes per year or eight per cent of the world’s LNG production.

Shell, led by chief executive Peter Voser, and ExxonMobil will each hold 25 per cent stakes.

A Shell spokesperson said the facility would have a “long life” and be an “important cash stream for years to come”. Shell’s shares dipped 2p to 1689p.

“This is a great milestone for Shell,” said Jon Chadwick, Shell’s executive vice president for Australia. “Gorgon will provide important supplies of energy to the fast-growing economies of the Asia-Pacific region.’

Sales contracts for more than half of Gorgon’s annual output have already been agreed with Chinese, Japanese, Indian and South Korean customers.

This includes a long-term supply contract between Shell and PetroChina signed in November 2008 for two million tonnes of LNG per year.

Shell and Chevron said they would secure more sales in the coming months.

“We’re confident of demand. Shell’s access to LNG import terminals around the world will give us further options for Gorgon gas,” said Chadwick.

A Shell spokesperson added: “The Asia-Pacific region is expected to be the world’s largest oil and gas ­consumer by 2030.”

The Gorgon gas field was discovered more than 30 years ago but production has been delayed, in part by environmental concerns.

As part of the go-ahead the Australian government has imposed stringent environmental conditions to protect more than 20 endangered animals in the area including the spectacled hare-wallaby.

Yesterday’s announcement was more good news for the industry following two major oil discoveries this month by BG Group off Brazil and BP in the Gulf of Mexico.

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