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Chevron’s Gorgon LNG project to cost $32 bln-paper

Reuters. Wed Mar 4, 2009 12:39am GMT

PERTH, March 4 (Reuters) - Chevron Corp’s (CVX.N) massive Gorgon liquefied natural gas (LNG) venture is expected to cost as much as A$50 billion ($32.03 billion), a newspaper reported on Wednesday, citing a government official.

Chevron, with joint venture partners ExxonMobil Corp (XOM.N) and Royal Dutch Shell (RDSa.L), is also expected to reach a final investment decision on the project by around the middle of this year, the WA Business newspaper said, citing the Western Australia State Premier Colin Barnett.

A spokeswoman from the Premier’s office could not immediately confirm the information. Chevron plans to build the Gorgon LNG processing plant on Barrow Island, located off Western Australia state.

Chevron could not be reached for comment.

Chevron, which owns a 50 percent stake in the Gorgon project, last year expanded the size of the Gorgon LNG processing plant to 15 million tonnes per annum (mtpa) from a previously planned capacity of 10 mtpa. The Gorgon gas fields, first discovered in 1981, have certified gas reserves of over 40 trillion cubic feet with a nominal development life of around 60 years.

ExxonMobil and Shell each own a 25 percent stake in the project. ($1=1.561 Australian Dollar) (Reporting by Fayen Wong; Editing by Michael Urquhart)

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Chevron Gorgon LNG Project May Cost A$50 Billion, Premier Says

By Angela Macdonald-Smith

March 3 (Bloomberg) – Chevron Corp.’s Gorgon liquefied natural gas project is set to cost about A$50 billion ($32 billion), higher than earlier estimates, Western Australian Premier Colin Barnett said.

The project may get the go-ahead about the middle of the year, Barnett said today at the 2009 Economic and Political Overview forum in Perth.

Barnett’s estimate for the cost of the delayed Gorgon project, which will initially produce 15 million metric tons a year of LNG, compares with an estimate of at least $23 billion by Barclays Capital in November. The venture, which includes Exxon Mobil Corp. and Royal Dutch Shell Plc and will be the nation’s biggest resources project, has increased the capacity of the planned plant by 50 percent since it was first proposed.

“That is now a 50 billion Australian dollar project,” Barnett said in an address, a recording of which was published on the state government’s Web site. “This state has in front of it, if we can get it right and get all those projects over the line, an extraordinary period of advancement.”

Chevron can’t yet give an estimate of the project cost because the construction work is still out to tender, said Nicole Hodgson, a spokeswoman for the company’s Australian unit in Perth.

“Any numbers that are floating around out there are speculation at the moment,” Hodgson said by telephone. Chevron won’t give a cost for the project until it receives the bids for building work and the partners make a final decision to proceed, which is due in the second half of the year, she said.

Barnett said he hasn’t given up on attracting Inpex Corp.’s planned $20 billionIchthys LNG project back to Western Australia from the neighboring Northern Territory. The state has about a “30 percent chance of getting it,” he said.

Land Negotiations

Western Australia is negotiating with local communities to use a site at James Price Point north of Broome for an LNG production precinct to process gas from the Browse Basin off the state’s far northwest coast. The negotiators have until the end of the month to reach an agreement, Barnett said today.

“If we can’t do it by negotiation the state will resume the land,” Barnett said. “I’ll do that reluctantly but we will do it. We will not hold up economic development.” To resume land is to take it back under government control.

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

To contact the reporter on this story: Angela Macdonald-Smith in Sydney atamacdonaldsm@bloomberg.net

Last Updated: March 3, 2009 04:13 EST