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Chevron Rules Out Joint Development With Woodside’s Pluto LNG

By Ben Sharples

June 3 (Bloomberg) – Chevron Corp. said it doesn’t plan to develop its Wheatstone project in collaboration with Woodside Petroleum Ltd.’s neighboring Pluto venture in Western Australia, increasing the likelihood the companies will compete for gas.

“There won’t be a cooperative development between Wheatstone and Pluto,” Geoff Strong, Chevron’s general manager for the project, said in Darwin today at the Australian Petroleum Production & Exploration Associationconference.

Wheatstone may support as many as five liquefied natural gas production units, Roy Krzywosinski, managing director of Chevron’s Australian unit, said yesterday. Woodside, Australia’s second-largest oil and gas producer and operator of the A$12 billion ($9.9 billion) Pluto project said yesterday it is in talks with four potential partners to process gas at the venture.

Chevron, the second-largest U.S. gas company, will offer “fair and reasonable” terms to attract gas from other producers for processing at Wheatstone, Strong said. California- based Chevron’s project will offer “a lower economic hurdle for gas discoveries in the West Canarvon Basin,” he said.

Chevron, which wholly owns Wheatstone, said in 2006 the field may cost $5 billion and start output in about 2013 or 2014. Wheatstone was discovered off Western Australia’s Pilbara coast in 2004.

There is “competition for third-party gas,” Lucio DellaMartina, Woodside’s executive vice-president for the Pluto project, said today. That “requires us to improve our performance,” he said at the Darwin conference.

Pluto ‘Compelling’

Given the infrastructure Woodside is putting in place at Pluto, the Perth-based company believes “it has a very strong and compelling case to put to third-party gas suppliers.”

Woodside aims to complete 85 percent to 90 percent of construction at the Pluto project by the end of the year, progressing from 75 percent at the end of this month, DellaMartina said today.

California-based Chevron also leads the Gorgon LNG project, which includes Exxon Mobil Corp. and Royal Dutch Shell Plc as partners. A final investment decision on the West Australian project is likely within months, Krzywosinski said yesterday.

Gorgon is projected to have an initial production capacity of 15 million metric tons a year, about 76 percent of Australia’s existing LNG capacity.

Woodside operates the North West Shelf LNG venture, Australia’s largest resources project.

To contact the reporter on this story: Ben Sharples in Melbourne atbsharples@bloomberg.net

Last Updated: June 3, 2009 03:52 EDT