The SMH reports that Chevron has now sold most of its share of future gas production from the Gorgon field off WA – Japan, Korea sign $70b Gorgon gas export deals. Note the projected income from these sales is based on a much higher oil price than at present.
THE giant Gorgon project in Western Australia has signed a binding agreement worth $70 billion with Japan and Korea to export almost 3 million tonnes of liquefied natural gas a year until 2039.
As the joint venture partners prepare to deliver a final investment decision as early as next week, the project’s operator, Chevron, firmed up three in-principle deals negotiated in 2005.
Under the deal, Japan’s Osaka Gas will take 1,375,000 tonnes a year over 25 years starting in 2014. The larger Tokyo Gas will take 1.1 million tonnes a year over the same period.
GS Caltex, a major South Korean energy company, will take 500,000 tonnes a year over 20 years, partly from Gorgon and the rest from Chevron’s other gas projects.
Chevron, which has a 50 per cent interest in the project – ExxonMobil and Shell each have 25 per cent – will sell down its equity in Gorgon. Osaka Gas will purchase a 1.25 per cent share and Tokyo Gas 1 per cent, leaving Chevron with 47.75 per cent. The equity deals will require the approval of the Foreign Investment Review Board but are not considered to be a concern.
The three deals leave about 2.7 million tonnes a year of LNG for Chevron to sell. Market sources say the company is in talks with China National Offshore Oil Corp and China Petroleum & Chemical Corp (known as Sinopec) to sell the remainder. Chevron expects final sales to be completed ”in the coming months”.
China remains hungry for LNG even after ExxonMobil agreed last month to supply the state-owned PetroChina with 2.25 million tonnes a year from the Gorgon project over 20 years – establishing it as Australia’s biggest trade deal.
The Prime Minister, Kevin Rudd, said the $50 billion Gorgon project was on track to become Australia’s biggest single infrastructure investment, creating up to 6000 jobs and generating $40 billion in revenue for the Government.
”It has been a great four weeks for Australia’s LNG sector,” he said. ”More than 2250 cargoes of Australian LNG have been delivered to Japan since 1989 and these agreements … mean there will be many more to come.
”Throughout the Asia Pacific, Australian LNG will be increasingly important as a reliable, secure, clean energy source to power continued economic growth.”
Doubts have been raised about the headline figures attached to the Gorgon LNG deals. A recent Goldman Sachs JBWere report gave current LNG prices at $US322 ($374) a tonne. Forecasts for 2014, when the project is expected to start exporting, are about $450 a tonne. This figure values the three deals at about $32 billion. To arrive at a figure more than double that, even allowing for the 2.25 per cent equity interest, would mean the Government is forecasting oil prices, from which the LNG price is calculated, to soar.