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Chevron Greenlights Gorgon LNG Expansion

Papua LNG

Chevron has said it will drill 11 new wells in the Gorgon and Jansz-Io fields offshore Australia as part of its expansion plan for the Gorgon LNG megaproject. Drilling will begin next year. The expansion will also include the construction of more pipelines and subsea infrastructure to send the gas pumped at the Gorgon project to the liquefaction plant on nearby Barrow Island, Reuters reports.

Chevron did not mention how much the expansion will cost, but according to a spokesman for the company, the investment won’t require any additional allocations to its approved annual investment plans for 2018-2020, which stand at US$18-20 billion.

The Gorgon project shipped its first gas cargo two years ago, and its productive life is estimated at 40 years. Chevron is the operator, with a little over 47 percent, and its biggest partners are Exxon and Shell, each with a 25-percent stake. The remainder is held by three Japanese companies, including JERA, Tokyo Gas, and Osaka Gas.

The current annual capacity of the three-train liquefaction facility on Barrow Island is 15.6 million tons of LNG. To put this in perspective, Shell recently estimated global LNG demand last year hit 293 million tons and will continue to grow quickly, potentially leading to a shortage in the middle of the next decade.

Related: How Significant Is WTI’s Breakout?

Gorgon’s start was not an easy one. The project stumbled on several production delays and substantial cost overruns that reached almost US$20 billion. It is Chevron’s biggest LNG project in Australia, but it is not the only one. The second and smaller one, Wheatstone, began producing gas last year, with an annual liquefaction capacity of around half that of Gorgon.

This year should see the launch of two more offshore LNG projects in Australia as the country stakes its claim as the world’s second-largest LNG exporter: Shell’s Prelude, which is one of the very few floating LNG projects, and Inpex-operated Inchtys. Two other LNG projects were shelved amid the oil and gas price drop, one by Shell, and another by Woodside Petroleum in partnership with BP and Shell.

By Irina Slav for Oilprice.com

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