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Chevron’s Gorgon Outage Set To Boost Asian LNG Prices

Gorgon LNG

Chevron Corporation has temporarily suspended train 3 of its Gorgon liquefied natural gas (LNG) plant in Australia—a development expected to boost Asian LNG prices that hit an eight-month low last week.

Chevron halted the third train at Gorgon to fix a mechanical issue, and the cause is currently being investigated, a Chevron spokesman told Reuters on Wednesday.

The other two trains at Gorgon are operating regularly and they continue to produce LNG and load cargoes, the spokesman noted.

According to LNG traders and industry sources who spoke to Reuters, the temporary suspension of train 3 is set to boost Asian LNG prices, which last week hit their lowest in eight months and are at their lowest for this time of the winter season in the northern hemisphere in at least two years.

At the end of last week, Asian LNG spot prices for February delivery slipped to $8.50 per million British thermal units (mmBtu)—the lowest since the middle of May 2018, as milder winter weather in Japan and parts of China had depressed spot LNG cargo demand in the region. In addition, stock levels of LNG in China are quite high, so the Chinese will not rush to procure spot cargoes at least until the Lunar New Year holiday in early February, traders told Reuters last Friday.

Referring to the cause of the Gorgon outage, some industry sources say that the mechanical issue at the suspended train 3 could have been caused by the current heat wave in Australia in the southern hemisphere summer.

“The past 4 days are in Australia's top 10 warmest days on record,” Australia’s Bureau of Meteorology tweeted on Tuesday.

Chevron’s three-train Gorgon project, which has the capacity to produce 15.6 million tons of LNG per year, sent its first LNG cargo in March 2016.

In April 2018, Chevron said that it would proceed with more offshore development at Gorgon. The expansion will involve drilling of 11 new wells in the Gorgon and Jansz-Io fields offshore Australia, with drilling set to begin this year.  

By Tsvetana Paraskova for Oilprice.com

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