Mikaila Adams
OGFJ Associate Editor
A groundbreaking ceremony in Western Australia has marked the formal start of Chevron's A$43 billion Gorgon project on Barrow Island.
The ceremony marked the start of construction of a three-train, 15 million metric ton per year LNG facility that is expected to create around 10,000 jobs during the peak construction phase and sustain more than 3,500 direct and indirect jobs throughout the lifetime of the project.
The Gorgon project has received plenty of buzz as of late. Wood Mackenzie recently noted that while it expects investment in the upstream oil sector to remain at levels similar to 2009, around US$325 billion, there are some exceptions. “There will be a few, major new capital projects implemented through 2010, such as Gorgon in Australia,” the firm reported in October.
With total gas resources of 40 trillion cubic feet, Gorgon may well be the biggest resources project in Australia's history.
Barnett said benefits from the project were already flowing to locally-based construction and manufacturing companies. Howard Porter, Mermaid Marine, Ertech and Laing O'Rourke have already been awarded contracts.
"Hundreds of millions of dollars will be spent on ongoing, long-term maintenance and service contracts," noted Western Australia (WA) Premier Colin Barnett.
"The State Government has a local content policy in place and has been working with the Chamber of Commerce and Industry through the Industry Capability Network to ensure local businesses are involved and will benefit from the Gorgon project."
While the majority of revenues from the project will flow to the Commonwealth, the Premier welcomed the Federal Government's pledge to spend 25% of expected Petroleum Resource Rent Tax from the project, worth up to $100 million a year, on WA infrastructure projects.
The first LNG from Gorgon is due in 2014 and domestic gas is planned by the end of 2015.
The Gorgon Joint Venture participants have entered into long term LNG sales and purchase agreements with customers in Japan, China, India, South Korea and North America.
In September, Australian subsidiaries of Chevron signed three long-term sales and purchase agreements for Chevron's share of liquefied natural gas (LNG) from the project. The agreements are for a total supply of nearly 3 million tons per annum (MTPA) of LNG to Osaka Gas, Tokyo Gas, and GS Caltex.
Signing on a few days later was Korea Gas Corp. The state-owned company signed on for 1.5 million tonnes/year of LNG for 15 years with an option to extend the contract another 5 years.
Just this week, Tokyo's Chubu Electric Power Co. signed a contract with Chevron to buy a 0.4% stake in the project . Kyodo News International reported the company will pay roughly 15 billion yen to secure 60,000 tons of LNG yearly starting in 2014. It is expected that the power utility will also sign a contract to purchase 1.44 million tons of LNG annually over 25 years from 2014 under the same project.
The Gorgon project, which includes a three-train, 15 MTPA LNG facility, a carbon dioxide injection project and a domestic gas plant, is operated by Chevron Australia Pty Ltd. with a 50% interest which will drop to 47.75% once equity sales are approved to Osaka Gas and Tokyo Gas. Subsidiaries of ExxonMobil and Shell both hold a 25% interest.
