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Chevron awards $1bn Gorgon LNG contract

The Australian, June 20, 2009

THE giant Chevron Corporation has awarded more than $1 billion of contracts for the planned Gorgon liquefied natural gas project in Western Australia, driving the venture closer to a final investment decision by its partners this year.

The latest contract for the 15million tonnes a year venture was for a construction village on Barrow Island valued at $500m, Chevron spokeswoman Nicole Hodgson said yesterday.

The neighbouring Pluto project is more than 65 per cent complete, with more than 100 of the 263 production modules delivered, Woodside Petroleum chief executive Don Voelte said.

Pluto and Gorgon are some of the most advanced LNG projects being planned among a clutch of more than 10 ventures involving Exxon Mobil, Royal Dutch Shell and Conoco Phillips.

The ventures in Australia and Papua New Guinea could more than double the region’s output of about 20 million tonnes a year at existing projects in the North West Shelf and Darwin.

Work on Barrow Island will start after Gorgon gets all the needed approvals from the government and venture partners, Ms Hodgson said yesterday.

The Chevron-led venture might approve the contract in the second half of the year, she said.

West Australian Premier Colin Barnett said in May that Gorgon might cost $50bn.

Given the lead time for construction, the world needed a Gorgon-sized project to take a final investment decision every year from 2009 to keep pace with the long-term demand, Mr Voelte said in a presentation at UBS’s recent resources conference in Sydney.

The $12bn Pluto project will have 85 per cent to 90 per cent of construction completed by the year-end, he said.

The Gorgon fields, about 200km off the West Australian coast, contain 40 trillion cubic feet of gas deposits and have an expected life of 60 years.

Chevron holds 50 per cent of Gorgon and is the operator, with Shell and Exxon having 25 per cent each. Woodside owns 100 per cent of the Pluto project.

A joint venture including Decmil, Leighton Holdings’s Thiess unit and Kentz won the award to build a 3300-bed construction village on Barrow Island, Ms Hodgson said.

Agility Project Logistics, Mermaid Marine and Offshore Marine Services had won contracts for tugs and barges, marine supply bases and logistics.

Pluto was on track to deliver LNG to customers next year, Mr Voelte said this month.

LNG is natural gas chilled to liquid form for transportation by ships to destinations not connected by pipeline.

The global recession has slowed demand for natural gas and the industry faces a surplus of supplies, raising the prospect of delays to LNG projects.

LNG prices have more than halved from their record levels in the middle of last year to less than $US7 per million British thermal units, according to government figures from Japan and South Korea, the world’s biggest buyers of the cleaner-burning fuel.

Bloomberg