MASSIVE LIQUIFIED NATURAL GAS DEAL SIGNED BETWEEN JAPAN & CHEVRON IN WESTERN AUSTRALIA


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LNG MASSIVE DEAL SIGNED WITH JAPAN BY CHEVRON IN WA

CHEVRON remains bullish on the outlook for conventional liquefied natural gas prices after signing a non-binding heads of agreement with the Japanese utility Tohoku to sell gas from its $US29 billion Wheatstone development near Onslow in Western Australia.

Chevron Australia’s managing director, Roy Krzywosinski, said the deal to sell Tohoku 1 million tonnes a year over 20 years was in line with traditional pricing for conventional LNG, adding ”we have not seen a degradation in prices”.

Mr Krzywosinski questioned whether low Henry Hub gas prices in the US, caused by a glut of shale gas, were sustainable and said while it was likely that LNG exports from North America would grow, he did not expect they would be ”of a volume that will have a material impact on what we believe will be the LNG demand coming out of the Asia-Pacific region”.

He said the Wheatstone project now under construction and the first LNG hub in Australia to accept third-party gas, was off to ”a flying start” and Chevron expected further gas discoveries would be made in the Carnarvon Basin.

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”We estimate there is between 25 and 35 trillion cubic feet of gas of what we would call uncommitted or yet to be discovered gas in the Carnarvon Basin and much of that gas … will need a home, so we think the hub concept is going to be the right concept to support this gas.”

After yesterday’s deal, struck with partners Apache Energy and Kuwait Foreign Petroleum Exploration Company, Chevron has long-term contracts over 80 per cent of its gas to come from the two-train Wheatstone project. It expects to expand it, potentially up to 25 million tonnes a year.

Chevron is also developing the giant three-train, 15 million tonnes a year Gorgon LNG project at Barrow Island, where it is sticking to its $US43 billion budget and target of first LNG by 2014. The project – Australia’s largest – is 40 per cent complete. Mr Kryzwosinski said front end engineering and design on a $US10 billion-plus fourth train would begin later this year, before a final investment decision planned for next year.

Gorgon is running two years ahead of Wheatstone, which Mr Krzywosinski said was a ”sweet spot” offering significant synergies in terms of purchasing power and equipment from running the two projects as a portfolio.

Chevron is a partner in the Woodside-operated Browse project, where design work is under way on the controversial $US35 billion plan to build an LNG hub on the Kimberley coast. Chevron was supporting the design work, but Mr Krzywosinski said Browse ”does have a lot of challenges – technically, environmentally and from a heritage perspective”.

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