Six-and-a-half years after Chevron started development of Australia’s single largest resources project, the $US54 billion Gorgon liquefied natural gas (LNG) plant has commenced production, though it is by no means complete.
Six-and-a-half years after Chevron started development of Australia’s single largest resources project, the $US54 billion Gorgon liquefied natural gas (LNG) plant has commenced production, though it is by no means complete.
The initial LNG production is from Gorgon's first processing train, with the first LNG cargo due to be shipped next week.
This milestone comes after what has been an often-difficult development path for the giant project, which has been affected by logistical challenges on Barrow Island, poor weather, and industrial disputes.
Gorgon and its contractors still have 6,500 workers on Barrow Island, indicating the scale of the work ahead.
Construction of the second and third LNG trains is still under way, with train 2 due to be completed in about six months, and train 3 in about 12 months.
The ramp-up to full production on each LNG train normally takes six to eight months, but Chevron is targeting a faster ramp-up as it applies lessons learned.
That suggests the plant is expected to reach its full capacity of 15.6 million tonnes of LNG per year after the middle of 2017.
Chevron Australia managing director Roy Krzywosinski was upbeat today when talking about the project’s significance.
“Gorgon is an intergenerational project set to deliver reliable cleaner-burning energy and generate substantial earnings over its expected economic life of 40+ years,” Mr Krzywosinski said in a statement.
Gorgon is also environmentally significant, as the plant has been built on a 332-hectare parcel of land on Barrow Island, which equates to 1.4 per cent of the A-class nature reserve.
“Gorgon demonstrates that with proper management and the right workforce culture, industry and environmental stewardship can co-exist.
“The application of world-class technology at Gorgon, for instance the flatbed design of the flare, help protect and respect the unique native fauna.”
Mr Krzywosinski said Gorgon was expected to contribute 18 per cent of Australia’s total future LNG production.
Chevron chairman and CEO John Watson said the company remained positive about Gorgon, despite the current weakness in oil and LNG prices.
“We expect legacy assets such as Gorgon will drive long-term growth and create shareholder value for decades to come,” he said.
“The long-term fundamentals for LNG are attractive, particularly in the Asia-Pacific region, and this is a significant milestone for all involved.”
A little more than 75 per cent of Gorgon’s LNG output is contracted to end customers, and that will lift to 80 per cent if recent heads of agreement with two Chinese utilities are converted to sales contracts.
The Gorgon project is jointly owned by Chevron (47.3 per cent), ExxonMobil (25 per cent), Shell (25 per cent) and three Japanese electricity utilities.
They have invested $US54 billion in the project, which equates to $A55 billion using the average exchange rate over the life of the development.
When Chevron announced its final investment decision in September 2009, the cost was estimated to be $A43 billion, equivalent to $US37 billion at the time, and first gas was planned for 2014.
The project’s site workforce peaked at 8,400, and is currently at 6,500 as construction continues.
Chevron’s achievements include an impressive safety record, with zero fatalities on the project.
Since 2009, Chevron has spent $A34 billion on Australian goods and services and awarded 700 contracts to Australian companies.
The long-term number of operational staff will be about 350, though the project will employ more during shutdowns and maintenance.
As well as producing LNG and condensate for export, Gorgon will be a major supplier of gas for the domestic market.
The first domgas plant, with output of 150 TJ/day, will commence in 2016, with a further 150TJ/day to follow when there is sufficient demand.
