Gorgon promoters to meet in Perth from 7th to 9th April

Vol 10, PW 23 (22 Mar 07) Midstream & Downstream

Crucial decisions about Australia’s Gorgon LNG project are likely to be taken next month after a key meeting in Perth convened by promoter Chevron and attended by senior management of partners ExxonMobil and Shell.

A source within Gorgon tells this report that Chevron will make a presentation about resizing the project to improve its economics against the threat of rising costs. Keenly waiting for the outcome of this meeting are Japanese LNG importers Osaka Gas, Tokyo Gas and others with whom Chevron has signed Heads of Agreements for its entire 50% share of LNG from Gorgon.

Also watching will be South Korea’s KOGAS. Gorgon is vital for Japan and South Korea because several existing LNG import contracts come to an end in 2008-09 and importers in both countries expected the project to begin production in 2010-11.

“There’s a lot of disappointment over the delay (at Gorgon),â€‌ a source in Tokyo tells this report. “This means we’ll have to go in for (costlier) short-term contracts until Gorgon comes on stream.

â€‌ Adds our Tokyo source: “We’ve been given to understand that rising costs is one thing, but Exxon would like Gorgon production to be delayed.â€‌ Why “Because they see (Chevron-controlled) Gorgon competing with (Exxon-controlled) RasGas (in Qatar) for the Far East market.

â€‌ Given the shorter distance from Australia, Gorgon can beat RasGas in the Japanese, South Korean and Taiwanese markets. Our Tokyo source points out that another reason for Exxon’s keenness to go slow could be concerns over RasGas losing US and European buyers because of slowing demand caused by global warming.

“Many of the planned LNG import terminals on the US west coast are unlikely to come up,â€‌ we are told. “This questions a major chunk of the 77m t/y capacity that RasGas will soon have.

â€‌ India is also keenly watching the Perth meeting because Shell has committed some of its 25% share of Gorgon LNG to GSPC, while Petronet-LNG is in talks to import Exxon’s 25% share of Gorgon LNG to its Kochi terminal.