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Trio of Majors Embark on Gorgon Mega Project

Liquefied natural gas output from Australia could nearly double in the coming years now that Royal Dutch Shell plc, ExxonMobil Corp. and Chevron Corp. are proceeding with the Gorgon liquefied natural gas (LNG) project to serve production from Australia's Greater Gorgon gas fields. The decision signals the start of initial construction on one of the world's largest gas developments. First LNG sales to Asian markets are expected in about five years.

Chevron will operate the project, with a 50% stake, with Shell and ExxonMobil each holding 25% shares.

"The project will nearly double Australia's liquefied natural gas output and we expect it to be in production for decades to come," said Malcolm Brinded, Shell executive director for the company's upstream business.

The project is to include construction of a three-train LNG liquefaction facility with an annual capacity of about 15 million metric tons per year on Barrow Island off Western Australia's coast, as well as a domestic gas plant. The first phase of development is expected to cost US$37 billion, according to Chevron.

Plans call for development of the Greater Gorgon gas fields, beginning with the Gorgon and Jansz-Io gas fields -- the largest gas discoveries to date in Australia -- with development facilities installed on the ocean floor in water up to 1,300 meters deep. Two subsea pipelines with a combined length of 240 kilometers will carry gas to facilities on Barrow Island. Gorgon is also expected to capture carbon dioxide produced alongside natural gas and store it more than two kilometers beneath Barrow Island.

"The Gorgon project will provide important supplies of energy to the fast-growing economies of the Asia-Pacific region and will have a domestic gas supply component, which we anticipate will be jointly marketed to gas customers in Western Australia," said Jon Chadwick, Shell executive vice president for upstream activities in Australia.

Last November Shell announced a long-term supply agreement with PetroChina for LNG from its share of Gorgon. During the 20-year contract Shell will sell up to two million metric tons of LNG per year to PetroChina. Shell's access to LNG import terminals around the world provides further options for Gorgon gas, the company noted.

ExxonMobil recently struck LNG sales and purchase agreements with PetroChina International Co. Ltd. and Petronet LNG Ltd. of India for its share of Gorgon LNG. "With global demand for LNG forecast to triple by 2030, the Gorgon Project will be a critical supply source in meeting this future demand, particularly for the economies in the fast growing Asia-Pacific region," said Neil Duffin, president of ExxonMobil Development Co.

Last week Chevron announced long-term sales and purchase agreements for its share of LNG from Gorgon. The agreements are for a total supply of nearly 3 million metric tons per year to Osaka Gas, Tokyo Gas and GS Caltex. Supply from both agreements is expected to begin in the second half of 2014.

The greater Gorgon area is estimated to have resources of 40 Tcf of natural gas with an economic life of at least 40 years. First LNG sales are targeted for 2014 and domestic gas is expected in 2015, according to ExxonMobil.

"Gorgon adds significant long-term reserves and production for Chevron, bolstering our strong resource replacement and underscoring the importance of Australia to our growing natural gas business," said Chevron's George Kirkland, executive vice president for global upstream and gas.

Kellogg Joint Venture Group (KJVG) has been awarded an engineering, procurement and construction management contract for the LNG downstream and logistics portion of the project. KJVG is a KBR-led venture consisting of partners JGC Corp., Clough Projects Australia Pty Ltd. and Hatch Associates Pty Ltd. Group, that will execute and construct the LNG facility.

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ISSN © 2577-9877 | ISSN © 1532-1266
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