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Shell Takes Stake in Wheatstone LNG Project

Royal Dutch Shell plc is taking a bigger bet on future growth of liquefied natural gas (LNG) by agreeing to become a natural gas supplier and equity partner in Chevron Corp.'s Wheatstone, one of two mega projects now under way in Australia.

Shell Development (Australia) Pty Ltd.'s unitization agreement gives it an 8% participating interest in the Wheatstone and Iago natural gas fields offshore northwest Australia. The agreement also gives Shell a 6.4% participating stake in Wheatstone. Financial details were not disclosed, but The Australian said the agreement is worth an estimated $2 billion.

With the Shell sale, Chevron would own close to 74% of Wheatstone. Apache Corp. has a 13% interest, while Kuwait's Kufpec has a 7% stake.

"The Wheatstone Project is set to become one of Australia's largest resource projects and Australia's first LNG hub," said Roy Kryzwosinski, managing director of Chevron Australia. "A final investment decision is expected in the second half of this year once environmental approvals and other associated agreements are finalized with various levels of government."

Front-end engineering and design work on Wheatstone is nearing completion, he said. Wheatstone's two LNG processing trains are to have a combined capacity of 8.9 million tons/year and a domestic gas plant. If it is sanctioned this year, Wheatstone's first LNG shipments could begin in 2016.

Wheatstone and Gorgon, Chevron's other massive LNG project now under way in Australia, are considered the "centerpieces" of the major's future natural gas production plans, Vice Chairman George Kirkland said last year (see Daily GPI, May 27, 2010). Shell holds a one-quarter stake in Gorgon, and it also has a 10% interest in Australian producer Woodside Petroleum.

The $37 billion Gorgon Project is slated to begin exporting LNG in 2014. Once Gorgon is completed, Chevron plans to move the workforce to the Wheatstone Project, according to Wood Mackenzie (see Daily GPI, March 24).

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