Chevron assesses inspection needs at Gorgon LNG Train 3

Chevron is assessing how best to inspect and potentially repair the third train at its 15.6mn t/yr Gorgon LNG facility in Australia following the discovery of weld defects on the propane heat exchangers of the plant's second train, the firm's executive vice president for upstream Jay Johnson said.

Johnson did not provide any timeline for an inspection during Chevron's second-quarter 2020 earnings call on 31 July, although maintenance on the third train is scheduled for next year. Chevron is also assessing whether to re-evaluate an inspection on Gorgon's first train, which was done during its planned maintenance last year, he said.

"We did not see the issue in Train 1, but we are assessing whether or not we need to re-evaluate that inspection and go through it again," Johnson said. "And we are addressing how best to inspect, and, if necessary, repair Train 3 at this time." Heat exchangers in a liquefaction train are involved in the pre-cooling and partial liquefaction of feed gas.

Spot LNG prices have edged up over the past three weeks because of disruptions to production at Gorgon, concerns over further production disruptions if the plant's first and third trains need to be taken off line for inspections to check for similar weld issues on their heat exchangers, and expectations of short-covering to replace lost cargoes.

The ANEA price, the Argus assessment for spot deliveries to northeast Asia, was at $2.605/mn Btu and $2.675/mn Btu for second-half August and first-half September respectively on 30 July. This is up by 28.5¢/mn Btu and 27.5¢/mn Btu respectively from 13 July.

The Australian Manufacturing Workers' Union (AMWU) called for an immediate shutdown of Gorgon on 20 July and for an inspection to be undertaken by the government regulator, because of the discovery of cracks on the second train's heat exchangers and fears that the plant's other two trains might be similarly affected because they were produced by the same manufacturer. The Department of Mines, Industry Regulation and Safety (DMIRS) said it would conduct an inspection at the plant site on 29 July and then distribute a report. It has yet to release its report.

Gorgon's second train has been on extended maintenance since 11 July, when planned maintenance that began on 23 May was scheduled to end. Johnson reiterated Chevron's statement on 28 July that it expects Train 2 to begin restart activities in early September.

The eight-week extended maintenance is expected to result in a loss of around 14 cargoes, based on the train's nameplate capacity of 5.2mn t/yr and a 60,000t cargo size. It is unclear how many replacement cargoes Chevron and other Gorgon term cargo suppliers Shell and ExxonMobil have secured from the spot market to meet term commitments. Term offtakers at Gorgon include Japan's Jera, Eneos — which was formerly known as JX Nippon Oil & Energy — Tokyo Gas, Kyushu Electric and Osaka Gas; China's PetroChina; India's Petronet; South Korea's SK and GS Caltex; and BP.

Trains 1 and 3 are operating "normally," Johnson said. "There have not been challenges in delivering on our commitments" and he does not "anticipate that as we look forward."

Chevron also operates the 8.9mn t/yr Wheatstone facility in Australia. The two plants do not share the same vendor and Johnson said he does not expect to see the same issue replicated at Wheatstone. The weld issues on Train 2's propane heat exchangers are "a manufacturing defect" and "not a design defect at all," Johnson said.

By Camille Klass