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Chevron May ‘Rocket’ Up LNG Production Rankings With Wheatstone

BLOOMBERG

By James Paton

Dec. 7 (Bloomberg) — Chevron Corp.’s Wheatstone liquefied natural gas project in Australia will help the company crack the top 10 on a list of the largest producers of the cleaner-burning fuel, a Tri-Zen International Ltd. consultant said.

Chevron, which unveiled an agreement valued at $82 billion to supply Wheatstone LNG to Tokyo Electric Power Co. on Dec. 5, is set to move up 14 notches in 2016 to the sixth spot in the global rankings, Tri-Zen’s Tony Regan said by phone today from Singapore. “Wheatstone will rocket Chevron up the LNG ladder,” Regan said.

Chevron’s Wheatstone and $39 billion Gorgon projects, both in Western Australia, are among more than a dozen ventures in the country seeking to tap rising demand for the fuel to reduce carbon emissions. Tokyo Electric joins companies in Japan, China, South Korea and India in buying Australian LNG.

San Ramon, California-based Chevron’s share of production capacity at LNG projects may rise to 21.6 million metric tons a year in 2016, when Wheatstone is scheduled to begin shipments, Regan said. That compares with almost 2 million tons a year in 2005, he said.

Chevron, the second-largest U.S. energy producer, and its competitors are investing heavily in Australia and making the country a more important part of their portfolios as they seek a larger slice of the LNG market, Regan said. Chevron, ConocoPhillips and Royal Dutch Shell Plc are among those set to boost their share of LNG sales while state-owned energy suppliers grow at a slower rate, he said.

‘Foundation’ Customer

Tokyo Electric’s Wheatstone contract will span as many as 20 years and cover almost half of the initial capacity of 8.6 million tons of LNG a year, Chevron said Dec. 5. Western Australian Premier Colin Barnett called the deal a significant step forward for the project and valued the transaction at about A$90 billion ($82 billion).

“That volume provides a foundation to move this project forward,” Graeme Bethune, a consultant at Adelaide-based EnergyQuest, said by phone today. “If you’ve got a major buyer who can take a chunk of your project like that it makes it a lot more achievable.”

Tokyo Electric, Japan’s largest power producer, is seeking supplies from other LNG projects in the region. Exxon Mobil Corp. completed an agreement to supply fuel from its $15 billion Papua New Guinea LNG venture to Tokyo Electric before a likely decision to proceed with the project, it said today. Tokyo Electric intends to buy 1.8 million tons of LNG annually over 20 years, Exxon said in a statement.

Qatar Petroleum, the state-owned oil producer, is expected to have the largest annual LNG production capacity in 2015 at more than 50 million tons, Regan projected. Shell is set to be second, he said.

The production estimates assume the projects achieve 100 percent of the capacity for which they are designed, Regan said.

To contact the reporter on this story: James Paton in Sydney [email protected].

Last Updated: December 7, 2009 03:31 EST

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