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Oil Heavyweights Worry About Future Oil Supply

Oil Heavyweights Worry About Future Oil Supply

Oil heavyweights are at odds…

Chevron Halts Production At Gorgon Plant For Second Time This Year


For the second time this year, Chevron has stopped production at its Gorgon liquefied natural gas operation in Australia. The plant had to be evacuated after a gas leak was detected.

Chevron will make the necessary repairs to the plant before restarting production next week. The plant is a joint venture with ExxonMobil, Shell, Osaka Gas, Tokyo Gas and Chubu Electric Power. The terminal, which is also owned in part by Exxon Mobil and Royal Dutch Shell, will still load cargo during the interim.

Matt Howell of Wood Mackenzie Ltd noted: “Another short delay is relatively inconsequential for a project that Wood Mackenzie estimates will generate cash flows of nearly $7 billion a year for the partners over many decades, but this latest event does introduce doubts about the facility’s reliability and ability to produce at capacity for that extended period.”

The operation has had a history of difficulties. In April, immediately after its first shipment of liquefied natural gas, Chevron had to stop operations to address a malfunction in a propane refrigerant circuit. On top of everything else, the company began shipping product to Asia during a severe energy slump. This week, Chevron is repairing the low-pressure flare system and acid-gas removal system. The company anticipates restarting production next week.

Related: Oil Outages Come Back Online, Cause Large Downside Risk

The Gorgon plant is the largest in the history of Australia and cost $54 billion. It is located off the country’s northern coast. According to the company’s website, it is developing the Gorgon and Jansz-Io gas fields. The project will handle 15.6 million-tons-per-year. The first and third cargoes will reportedly go to Chevron, while the second and fourth will go to partners Exxon and Shell, respectively.

Chevron executive vice-president of technology and projects, Joseph Geagea had previously stated that the company expected to reach full production within six to eight months after the plant began operations.

By Lincoln Brown for Oilprice.com

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  • Bassam El Wazni on August 12 2016 said:
    Zipsprite.. the cost is $54 billion..not $154 billion...seems a typo error.
  • zipsprite on July 03 2016 said:
    If the $7 billion/year were 100% profit (I assume profit is a small fraction of that?) it would take 22 years to recoup the $154 billion it cost to build the thing. If profit was 25% it would take 88 years to break even. Doesn't seem to add up. What am I missing here?

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