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Shell Australian LNG coming to America Deal for Gorgon project replaces some Sakhalin LNG to Sempra at Baja; Gazprom prepares to trade with Shell for Sakhalin stake Allen Baker Petroleum News Contributing Writer
Royal Dutch/Shell Group has made a commitment to ship up to 2.5 million tonnes of LNG annually from the Gorgon offshore field near Australia to Sempra’s Energia Costa Azul terminal, now under construction on the Pacific Coast near Ensenada, Mexico.
The deal, announced in Australia April 11, is considered a boost for development of the huge Gorgon area, which contains around 40 trillion cubic feet of gas reserves. The joint venture project is expected to cost about $8.5 billion, with a final financing decision expected in the middle of next year.
Shell’s commitment represents the company’s entire share of the projected 10 million tonnes annually that would be produced initially from the Gorgon field, starting in 2010. The commitment spans 20 to 25 years, and is worth more than $10 billion, Shell said. It’s the equivalent of about 330 million cubic feet a day.
Shell and its Gorgon partners, ChevronTexaco and ExxonMobil, earlier in April integrated their interests in various Gorgon leases, with ExxonMobil agreeing to add its huge Jansz discovery and the Io field to the pot. Operator ChevronTexaco now holds 50 percent of the joint venture and the other partners 25 percent each.
The venture has been trying to hammer out a deal with China National Offshore Oil Corp. that would be worth in the neighborhood of $25 billion, for shipment of 80 million to 100 million tonnes of LNG to China over 25 years. The companies are also targeting markets in Japan and Korea, as well as China, Shell said. Sakhalin replacement The Gorgon sales will dovetail with Shell’s Sakhalin plans. Shell has rights to half of the capacity at Sempra’s Mexican terminal. That amounts to 3.7 million tonnes of LNG per year, or the equivalent of 500 million cubic feet of natural gas daily.
Shell said in the fall that it would fill its share of the Ensenada capacity by delivering LNG from the Sakhalin 2 venture, where Shell has held a 55 percent stake.
But Shell also has commitments to customers elsewhere in Asia for later years, and so the Gorgon production would neatly fill much of Shell’s share of the Sempra terminal’s capacity. Sakhalin cargoes could be redirected elsewhere.
Sempra, the owner and operator of Energia Costa Azul, broke ground and began major construction on the $800 million terminal March 30.
Sempra has a long-term contract to fill its half of the terminal’s initial capacity with 3.7 million tonnes of LNG annually from the BP-led Tangguh project in Indonesia. Gazprom deal Shell may have other motives for finding an alternative to Sakhalin 2 for supplying the West Coast terminal. The company has been talking with Russia’s Gazprom for a trade of a large stake in the Sakhalin project.
Gazprom could get a quarter of Sakhalin 2 in exchange for half of the Zapolyarnoye gas field in far northwestern Siberia, according to Russian executives.
Gazprom is already in line for a 20 percent stake in Sakhalin 1 when it merges with government-owned Rosneft and becomes majority-owned by the Russian state. The company also has interests in Sakhalin 4 and Sakhalin 5.
A focus on Sakhalin by the huge gas company could be another blow to TNK-BP, which is depending heavily on Siberia’s $18 billion Kovykta development, which needs Gazprom approval.
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