Chevron on Track to Export First Gas From Gorgon Project in Australia
Last Friday, U.S. oil major Chevron Corp. said that its on track to export the first cargo of liquefied natural gas (LNG) from its Gorgon project in Australia early this year. The Gorgon Project, which cost $54 billion to build, is the world’s most expensive LNG project, costing nearly double its original estimated price tag due to massive budget blow outs. It is also being completed a full year later that expected.
Chevron said that in preparation for the project’s start-up it had begun to cool down the LNG storage and loading facilities at the Gorgon plant on Barrow Island off Western Australia.
The project is a joint venture between Chevron (47.3%), Exxon Mobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%), and will produce a total of 15.6 million tonnes per annum (mmtpa) of LNG.
With prices for both global benchmark, London-traded Brent crude and U.S.-bench mark, NYMEX West Texas Intermediate (WTI) crude prices off more than 70% since mid-June 2014, and with both benchmarks settling in the high $20s range at the end of last week, coupled with spot LNG prices in Asia also still in a downward free-fall, off more than two thirds since February 2014, the Gorgon Project will be coming on-stream at a most precipitous time.
Global LNG output reached 250 mmtpa in 2015
However, low energy prices are only half of the story; there is also an ongoing supply glut for the super-chilled fuel, particularly in the Asia-Pacific region, that will only be exacerbated. According to a report released last week by energy consultancy Wood Mackenzie, global LNG production in 2015 reached 250 mmtpa, led by growth in Australia. Last year two coal seam gas (CSG) LNG projects in Australia – Santos’ GLNG project and the Queensland Curtis LNG (QCLNG) Project – came on-stream, increasing the country’s LNG export capacity from 24 mmtpa to 31 mmtpa. Also, last week the $24.7 billion Australia Pacific LNG (APLNG) facility on Curtis Island in Queensland shipped its first cargo.
Other LNG projects will soon be coming on-stream in Australia. By 2017, when all of of Australia’s ten projects are operational, the country will have a total liquefaction capacity of 85 mmtpa, accounting for 35% of current global LNG demand. With 10 projects on-stream, Australia will bypass Qatar’s 77 mmtpa and become the top global LNG exporter.