Perth: US oil firm Chevron has sealed an estimated A$70 billion ($60 billion) worth of gas deals with three North Asian buyers for its massive Gorgon project in Australia, paving the way for a final investment decision in coming weeks.
The $42-billion Gorgon project, awaiting final approval from Chevron and its partners, is expected to be given the go ahead by the middle of this month with the sealing of the gas deals.
Chevron said on Thursday it would sell Osaka Gas 1.375 million tonnes of LNG per annum (mtpa) over 25 years, and Tokyo Gas 1.1 million tonnes. GS Caltex in South Korea will buy 0.5 million tonnes for up to 20 years.
Chevron, which has an unfinalised sales agreement with Chubu Electric for 1.5 mtpa, still has about 3 mtpa of uncontracted gas from Gorgon and said it expects further LNG sales from the project in coming months.
“China will probably have appetite for more LNG and South Korea’s Kogas has also expressed interests in buying gas and taking equity in projects, so that’s probably where the rest of Chevron’s gas could go,” said Stuart Baker, an energy analyst at Morgan Stanley.
Under the agreement, Chevron will also sell an equity share of 1.25% in the Gorgon project to Osaka Gas and another 1% to Tokyo Gas, reducing Chevron’s stake to 47.75%.
Chevron did not disclose the financial details of the LNG and equity sales, but Australian Prime Minister Kevin Rudd said separately that Chevron’s sales agreement would be worth more than A$70 billion ($60 billion) of exports over 25 years.
“This is a massive project that will deliver economic growth, income, jobs, prosperity for the nation for decades to come,” Australia Prime Minister Kevin Rudd said.
Chevron’s latest gas sales from Gorgon, which finalises agreements first reached in 2005, comes on the heels of a A$50 billion export deal inked by partner ExxonMobil Corp with Chinese state-owned PetroChina last month, and brings total gas sales from the project to an estimated A$200 billion.
The proposed 15 million tonnes per annum (mtpa) Gorgon project, which has seen years of delay amid environmental concerns, comprises three production trains and a gas plant for the domestic market. ExxonMobil and Royal Dutch Shell each hold a 25 percent stake in the project.
With the Asia-Pacific region seeing around a dozen proposed LNG projects, many of which are racing to come onstream in the 2014-2015 timeframe, some analysts say the global LNG market was unlikely to be able to accommodate all these new capacities.
They said projects that failed to secure buyers would be quickly deferred.
“A lot of operators have been very optimistic about an explosion of demand, but we hold a more conservative view that demand growth would be slower than expected,” said an analyst who declined to be identified.
“If even four of five of the proposed projects around Australia get developed, that would bring more than enough supplies to meet demand,” he said.
Gorgon, which will be underpinned by 40 trillion cubic feet of gas resources off western Australia, would be Australia’s largest-ever resources development and is expected to create about 6,000 jobs at its peak and inject about A$33 billion ($28 billion) into the economy.
Chevron has not announced an estimated cost for the project, but Australian government officials have put it at about A$50 billion.