ENERGY giant Chevron has given Western Australian gas customers fresh cause for optimism, promising to start domestic supplies from its $25 billion Wheatstone liquefied natural gas project at Onslow in tandem with first gas exports in 2016.
ENERGY giant Chevron has given Western Australian gas customers fresh cause for optimism, promising to start domestic supplies from its $25 billion Wheatstone liquefied natural gas project at Onslow in tandem with first gas exports in 2016.
Chevron’s pledge comes despite it not yet having finalised the details of its Wheatstone domestic supply obligations with the state government.
“Right now, we’re tracking on it (domestic supply) being started around the same time as first gas to the LNG plant,” Chevron Australia chief Roy Krzywosinski told WA Business News at an industry function this week.
Mr Krzywosinski said discussions with the state government to finalise the details of Wheatstone’s domestic obligations were under way, and that the company fully supported the government’s desire to increase local supplies.
“We see that as a good thing that will increase competition,” he said. “We are having that dialogue now (but) we’ve committed to supply a domgas feed.”
Wheatstone is initially expected to supply at least 150 terajoules of gas a day to the local market, equivalent to 15 per cent of current demand.
Wheatstone supplies would come a year after the first domestic sales from Chevron’s $43 billion Gorgon LNG project, continuing an unprecedented boom in domestic gas development. Apache is nearing completion of its Devil Creek domestic gas project near Karratha, while BHP’s Macedon domestic gas project is due to start production in 2013.
These projects will collectively boost domestic supplies by 60 per cent, which producers say is proof that supply is growing to meet real demand.
Chevron’s early domestic commitment puts it at odds with rival LNG developer Woodside, which is yet to provide any firm details of when local buyers can expect to purchase gas from its $13 billion Pluto project on the Burrup Peninsula.
Pluto, which is due to start production in the first half of next year, was the first project to come under the then Labor state government’s reservation policy in 2007, requiring it to quarantine 15 per cent of its gas reserves for the local market.
Under its obligations, Woodside has five years from first gas exports to start supplying local buyers unless it can prove that a domestic production stream from Pluto is unviable.
The WA Domgas Alliance, which has been aggressively lobbying for increased domestic supplies to counter sharply rising prices, welcomed Chevron’s early domestic gas commitment from Wheatstone, and said the same should be expected of all LNG projects, including Pluto.
“Given the state’s serious gas shortage, supply should be made no later than LNG start-up,” alliance executive director Gavin Goh said, adding that customers expected Woodside to also commit to a firm timetable for domestic supply from Pluto.
But that seems unlikely given Pluto currently has only sufficient gas reserves to supply its single foundation production train, and a mooted expansion depends on additional discoveries by Woodside or a third party processing deal with other resource owners.
To that end, Woodside this week bought out joint venture partner Hess Corporation’s half stake in the WA-404-P permit, 140km west of the Pluto platform, believed by analysts to contain at least 2.5 trillion cubic feet of gas.
Woodside also has high hopes for its remote Claudius permit, 400 kilometres west of Pluto. Crucially, any pipeline linking Claudius to Pluto would cut across the big Scarborough field held by ExxonMobil and BHP Billiton.
Though BHP initially planned a standalone plant near Wheatstone, Woodside is known to have discussed a cheaper production tie-up with its Pluto facilities.
That has already won the strong backing of Premier Colin Barnett, who told parliament this month that he would prefer that Scarborough be integrated with either Pluto or the North West Shelf to avoid “overinvestment” in LNG capacity in the Pilbara.
His comments were viewed by some as precluding a processing deal with Wheatstone.
Opposition state development spokesman Mark McGowan described Mr Barnett’s “level of interventionism” in the commercial decisions of major companies as “extraordinary”.
Mr Krzywosinski declined to comment on Mr Barnett’s remarks and said Chevron believed Wheatstone offered an “equitable value proposition” to aspiring LNG producers.
“The more molecules we can get through the system, the better it is for everybody,” Mr Krzywosinski said.
The initial two-train Wheatstone plant will produce almost 9mtpa of LNG, but could potentially be expanded to five trains producing 25mtpa. Chevron has already divested a 25 per cent interest to secure Apache’s Julimar and Brunello fields, while analysts believe Chevron’s recent Acme and Clio discoveries alone may be sufficient for a third production train.
