04/01/2008 - 13:37

Chevron expands Gorgon to 15mt, orders $670m drilling unit

04/01/2008 - 13:37

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Oil and gas producer Chevron is planning to seek environmental approval for an additional gas production train on Barrow Island, after deciding to expand the capacity of its proposed Gorgon liquefied natural gas (LNG) project by 50 per cent.

Oil and gas producer Chevron is planning to seek environmental approval for an additional gas production train on Barrow Island, after deciding to expand the capacity of its proposed Gorgon liquefied natural gas (LNG) project by 50 per cent.

Its decision has been driven by the rising cost pressures facing project developers in WA's north and is likely to renew debate over the giant project, which has already been subject to several years of environmental scrutiny.

"The Gorgon Joint Venturers have endorsed a change in project scope from 2 x 5 million tonne per annum (MTPA) trains to 3 x 5 MTPA LNG trains," company spokesman Scott Walker said.

"Developing three LNG production trains in quick succession improves project economics and addresses mounting industry cost pressures."

Mr Walker said the project has approval for a 2 x 5 MTPA LNG facility on Barrow Island and will need an additional approval for the extra train.

"We expect very little change to the environmental impact on Barrow Island as a result of changing from two trains to three as the three train development will still be built within the approved 300 hectare development envelope - which represents 1.3% of Barrow Island," he said.

"A formal environmental assessment for the third train will be referred to the Western Australian Environmental Protection Authority early in 2008.

"The 15 MTPA Project will generate more clean-burning natural gas sooner in a rapidly growing global energy market, and lead to greater community benefit as a result of the three train Project's economic impact."

Joint owners Chevron, ExxonMobil and Shell said in a statement they were committed to progressing the project and were continuing to examine opportunities to reduce execution costs and uncertainty.

During the next 12 months, the project will be working with government to secure approvals for the additional train, commence front-end engineering and design, expand the capacity of the project team and consider early works on Barrow Island.

The Gorgon Project, with an estimated resource base of more than 40 trillion cubic feet of gas located up to 200 kilometres offshore and in water depths of up to 1300 metres, has a nominal development life of around 60 years and is operated by the Australian subsidiary of Chevron in joint venture with Australian subsidiaries of ExxonMobil and Shell."

Meanwhile, Chevron has signaled its commitment to further exploration off Australia's north-west coast by awarding a contract for a new US$590 million (A$670 million) drilling unit.

"This is a significant contract which underpins Chevron Australia's long-term commitment to find, appraise and develop Australian gas resources for domestic and international markets," Mr Walker said.

Chevron Australia has placed the order with United States company Atwood Oceanics Inc. to provide a newly-constructed semi-submersible drilling unit for a period of at least three years, with an option for up to six years.

The operating cost of the rig will be US$470,000 per day for three years, and may increase subject to cost escalation provisions in the contract.

Atwood has estimated that the total cost of the rig (including administrative and overhead costs and capitalised interest) will be US$570 million to US$590 million.

It has executed a construction contract with Jurong Shipyard Pte Ltd to construct the drilling unit at Jurong's Singapore shipyard, with delivery expected to occur in early 2011.

The new rig will be able to conventionally moor in up to 6,000 feet of water with its own mooring equipment and with pre-laid mooring equipment could work in up to 8,000 feet of water.

As well as Gorgon, Chevron Australia is working on development of its wholly-owned Wheatstone gas field, located 145km off the north-west coast near Dampier. It has about 40 people studying development options, including a gas-to-liquids plant.

Chevron drilled an appraisal well in October 2007 and plans to conduct further appraisal drilling on both Wheatstone and the adjacent Iago field in 2008.

Since 2005, Chevron has successfully bid for seven new deepwater permit areas off the north-west coast and made new gas discoveries at the Wheatstone, Chandon and Clio fields.


 


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