Gorgon sales deals signed

Gorgon Barrow Island All 51 modules required for the three LNG trains have been delivered to Barrow Island. Image courtesy Chevron.

CHEVRON will sell liquefied natural gas to two Chinese companies under agreements signed in January, as commissioning of the Gorgon LNG project gets underway.

China Huadian Green Energy, a subsidiary of one of the largest state-owned power generation companies in China, signed a non-binding heads of agreement (HOA) to buy up to 1 million metric tonnes per year of LNG over 10 years, starting in 2020.

In the same month ENN LNG Trading Company signed a HOA to buy 500,000 metric tonnes of LNG per year for 10 years, with deliveries starting in late 2018 or early 2019.

ENN Energy Holdings is one of China’s largest natural gas distribution companies, operating in 146 Chinese cities – with the company’s Zhoushan LNG receiving terminal expected to be operational by 2018.

Chevron Australia managing director Roy Krzywosinski said he was looking forward to building a lasting relationship with future customers as the Chevron-operated Gorgon and Wheatstone projects moved into production.

“The China Huadian agreement demonstrates Chevron’s equity gas from Australia is well-placed to meet the growing demand for natural gas in the Asia-Pacific region,” he said.

“As first LNG production from the Gorgon project draws near, we welcome ENN as a new customer… This deal shows the competitiveness of LNG supply from Chevron’s Australian projects.”

Chevron expects to commence exports from the Gorgon project in early 2016, with company-operated LNG vessel the Asia Excellence arriving in December 2015 to commence a cooldown of the LNG storage and loading facilities at Gorgon.

Mr Krzywosinski said the commissioning cargo was essential for the final testing of critical systems at the facility and to effectively cool down the plant prior to the start of production.

In an earnings call made following Chevron’s fourth quarter announcement, at the end of January, company chief executive John Watson said first LNG production was expected “within the next few weeks.”

“We will be ramping up train one in the months ahead. Gas for train one startup will come from Jansz-lo wells,” he said.

“On trains two and three, all modules have been delivered to site and construction is progressing. Lessons learned from train one are being applied and key milestones are being achieved on schedule with start-ups expected at approximately six-month intervals after train one.”

“Successful completion and start-up of these and other major capital projects will translate into significantly lower capital spending, higher production and growing cash generation in the months ahead,” he added in an announcement.

Chevron recorded a loss of US$588 million in the fourth quarter of 2015 and full  calendar year earnings of US$4.6 billion.

This was down on the US$19.2 billion earned in in 2014, which Mr Watson said reflected a fall in crude oil prices.

Gorgon project is a joint venture of the Australian subsidiaries of Chevron (47.3 per cent), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).

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