THE WALL STREET JOURNAL: Gorgon Gas Deal Boosts A$11Bn LNG Export Plan: “Under the new framework agreement, Greater Gorgon's 40 trillion cubic feet (tcf) of natural gas resources will be owned 50% by ChevronTexaco, 25% ExxonMobil and 25% Shell.” (ShellNews.net) Posted 7 April 05
By STEPHEN BELL
Of DOW JONES NEWSWIRES
PERTH -- Having settled ownership of its A$11 billion (US$8.4 billion) Gorgon liquefied natural gas project offshore Western Australia, ChevronTexaco Corp. (CVX) said Wednesday that it hopes to conclude talks with Chinese LNG buyers in
the next few months.
ChevronTexaco said that it will operate and own half of the combined "Greater Gorgon" fields, in a deal that simplifies ownership while more than doubling the amount of gas that can be marketed to customers in Asia and North America.
The deal will not hasten development of Gorgon, which is due to ship its first LNG by late 2009. But the Gorgon partners - the others are ExxonMobil Corp. (XOM) and Royal Dutch/Shell Group (RD) - claim the inclusion of deep water fields such as Jansz make the project more "competitive".
Demand for LNG in Asia is rising as countries such as China and India prepare to join Japan and Korea as major importers of the fuel.
But Gorgon, one of Asia's biggest gas accumulations that was discovered three decades ago, faces intense competition from other suppliers in Australia, along with the Middle East, Russia, Malaysia and Indonesia.
Under the new framework agreement, Greater Gorgon's 40 trillion cubic feet (tcf) of natural gas resources will be owned 50% by ChevronTexaco, 25% ExxonMobil and 25% Shell.
In the "old" structure, ChevronTexaco had 4/7th, Shell 2/7th and ExxonMobil 1/7th of the 13 tcf of gas reserves at Gorgon itself.
However, combining Gorgon with several other nearby fields proved difficult because of different ownership arrangements. Shell , for instance, previously had no interest in the Jansz field that is now a key part of the proposed development.
George Kirkland, ChevronTexaco executive vice president for Upstream and Gas, said the deal will help ensure that Gorgon is developed in the most "technically and economically efficient way to meet the growing demand for gas in the Asia-Pacific region and North America".
Jay Johnson, managing director of ChevronTexaco Australia, said that marketing for Gorgon's gas is "well advanced", while the project has started preliminary front-end engineering and design work.
The deal will boost Gorgon's marketing clout, analysts say.
"It creates a strong marketing presence if you have 40 tcf of gas resources," said John Hirjee, an energy analyst at Deutsche Bank.
"Also blending in gas that has lower quantities of carbon dioxide may help the economics of the project," he said, in a reference to the Jansz field.
Gorgon Competing With Woodside For Asia, US Markets
Located around 70km from the proposed LNG development site on Barrow Island, Gorgon contains relatively high levels of waste carbon dioxide gas that the partners plan to reinject into saline reservoirs deep beneath existing oil fields at Barrow.
Jansz, part of the so-called deep water Gorgon fields, is around twice as far from Barrow but contains virtually no carbon dioxide, analysts say.
"It is a breakthrough deal as it allows us to bring gas from both Gorgon and Jansz into the LNG development on Barrow Island," a ChevronTexaco spokesman told Dow Jones Newswires.
"That is the optimal development plan and it will make us more competitive in the market place," he said.
Gorgon, along with other projects in Australia, is facing rising cost pressures due to an estimated 70% hike in steel prices over the past 12 months. A shortage of skilled workers is adding to the pressure.
The Gorgon venture signed an initial A$30 billion agreement in October 2003 to supply as much as 100 million metric tons of LNG to China National Offshore Oil Corp. over 25 years.
As part of that deal, CNOOC agreed to buy a 12.5% stake in the project. It is believed that CNOOC will now be offered a 5-6% stake in the enlarged venture.
A combined ownership and gas offtake deal was meant to be finalized with CNOOC by the end of last year.
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