LNG's a tough business for Chevron

Author Kwok Wan

So, Chevron is leading three huge LNG projects, costing $54bn for the 15.6mn t/yr Gorgon LNG project and $29bn for the 8.9mn t/yr Wheatstone LNG project — both in Australia — and $10bn for the 5.2mn t/yr Angola LNG.  That’s $93bn in total. That's $93,000,000,000.

So, Chevron is leading three huge LNG projects, costing $54bn for the 15.6mn t/yr Gorgon LNG project and $29bn for the 8.9mn t/yr Wheatstone LNG project — both in Australia — and $10bn for the 5.2mn t/yr Angola LNG.  That’s $93bn in total. That's $93,000,000,000.

And what do you get?

Delays, delays and delays, plus a major pipeline rupture.

Gorgon is the huge one.  The start-up of the first liquefaction train at the facility is likely to be delayed to early 2016.

"The schedule is dependent on managing commissioning and start-up risks, including equipment malfunctions, possible weather and labour disruptions, and other unforeseen issues," the company said. "We are working to achieve the first LNG cargo by year-end. However, given these risks, it is likely to occur in early 2016."

Gorgon's cost has already overrun by around $17bn, and first LNG was expected in 2014.  Chevron operates Gorgon and holds a 47.3pc stake in the project. ExxonMobil and Shell each own 25pc, while Japanese utilities Osaka Gas, Tokyo Gas and Chubu Electric own 1.25pc, 1pc and 0.417pc, respectively.

Wheatstone has been a bit easier.  Chevron said it could be delayed to the end of 2016 because of the late delivery of modules.

The Wheatstone project was supposed to start in 2015.  It comprises Chevron (64.14pc), Kuwait’s state-owned Kufpec (13.4pc), Australian independent Woodside (13pc), and Japanese utility Kyushu Electric Power (1.46pc), together with PE Wheatstone, which is part owned by Japan’s Tepco (8pc).

Angola LNG is scheduled to restart in 2015 and reach sustained production in 2016. The liquefaction facility has been off line since April last year after a huge pipeline rupture.  It loaded its first cargo in June 2013, around a year behind schedule, and operated well under full capacity.

Chevron holds a 36.4pc share of Angola LNG, Angolan state-owned Sonangol has 22.8pc, Total, BP and Italy's Eni each have 13.6pc.

The LNG business can be a risky game where deep pockets and patience are sometimes necessary, and sometimes essential.

For more information, please contact OilBlog@argusmedia.com

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