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Providing coverage of Alaska and northern Canada's oil and gas industry
May 2009

Vol. 14, No. 19 Week of May 10, 2009

Chevron gets approval for expanded Gorgon

$25 billion LNG project off Australia gets environmental approval for third train, but investment decision is still months away

Allen Baker

For Petroleum News

Chevron Corp. has received approval from Western Australia’s Environmental Protection Authority to expand its Gorgon LNG project on Barrow Island. The approval came April 29.

The huge project — now expected to cost about $25 billion (U.S.) — would draw gas from the offshore Gorgon and Jansz fields, which hold an estimated 22 trillion cubic feet of gas. Liquefaction and loading facilities would be located off Barrow Island, a wildlife sanctuary where Chevron has had oil facilities for four decades.

The latest approval allows Chevron and its partners to add a third train producing 5 million metric tonnes of LNG annually. That means the plant could ship out the LNG equivalent of about 2 billion cubic feet of natural gas a day.

Chevron welcomed the EPA decision as “an important step in the regulatory process,” but wasn’t ready to write a check for the long-delayed project just yet. “Chevron can now continue to assess the conditions as it works toward a final investment decision in the second half of this year,” the company said.

Chevron is the operator and holds a 50 percent interest. Partners Shell and ExxonMobil have 25 percent each. If Gorgon goes ahead, it will be Australia’s largest single resource project, according to Chevron.

Sunrise roadblock?

Another major LNG project off Australia is running into difficulty. After operator Woodside said May 1 it was considering a pipeline to Australia or a floating LNG liquefaction plant for the Sunrise field in the Timor Sea, the government of East Timor said it wanted the plant on its soil. The field straddles waters of both nations.

“The fact that one pipeline has gone already to Australia, we feel that it’s only fair that the other one comes to Timor-Leste,” East Timor Secretary of State for Natural Resources Alfredo Pires told Bloomberg in a May 6 interview. “We also have studies that confirm that the Timor-Leste option is much more viable than we had been led to believe.”

Woodside holds a 33 percent interest in Sunrise, ConocoPhillips has 30, Shell 27 percent and Osaka Gas 10 percent. The field about 300 miles northwest of Darwin holds more than 5 trillion cubic feet of gas as well as significant amounts of condensates.

Woodside had said the partners were planning to market LNG from the project to Asian buyers later this year.

China on LNG trail

China is busy these days locking up natural resources around the globe while prices are attractive. LNG appears to be on the shopping list.

China reportedly has agreed to buy a third of the production from a proposed $11 billion ExxonMobil-operated project in Papua New Guinea. In addition, China’s Sinopec is looking at a 20 percent stake in an Iranian LNG project, according to an official of Iran’s national gas export company. The Iranian project would tap the South Pars gas field, the world’s largest, for two LNG trains producing the LNG equivalent of 2.1 billion cubic feet of gas daily.

The future of the LNG market is still looking tentative with the collapse of prices late last year and the prospect of huge supplies coming from Qatar in the next year or so. But suppliers are beginning to show some confidence that demand from Asia, particularly China, will grow in the next few years.

China is building new LNG import terminals along the east coast and expects to have the capacity to import the equivalent of nearly 5 billion cubic feet a day by 2015.

FERC approval for Oregon project

The Federal Energy Regulatory Commission says the proposed Jordan Cove LNG terminal at Coos Bay, Ore., and an associated 234-mile pipeline won’t cause significant environmental damage.

The agency issued its final environmental impact statement on the project May 1. Developers of the terminal are Fort Chicago Energy Partners LP and Energy Projects Development LLC.

FERC last fall approved the projected Bradwood Landing LNG terminal on the Columbia River, and is considering another proposal for a second terminal on that river. An attempt to restrict LNG terminal development appears to have foundered in the Oregon Legislature this spring.

Meanwhile, Sempra Energy reported May 5 that its first-quarter profits rose 40 percent as the cost for natural gas dropped to $540 million from $1.2 billion a year earlier at its San Diego Gas & Electric subsidiary. The Sempra LNG subsidiary, however, posted a loss of $7 million in the quarter. Sempra LNG operates the West Coast’s only operating LNG import terminal at Ensenada, Mexico.

And on the East Coast, the new offshore LNG terminal near Boston finally got its first cargo in late April. Excelerate Energy LLC uses onboard re-gasification on its ships, then pipes gas to shore from an offshore site. But glitches in the system left the company’s Explorer vessel waiting for three months for repair of a pipeline blockage.






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