14/09/2009 - 09:56

Gorgon approved, valued at $43bn

14/09/2009 - 09:56

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Australia's biggest single resource project has officially been given the go ahead by its joint venture partners, which have stated that the first phase of development will cost $43 billion.

Australia's biggest single resource project has officially been given the go ahead by its joint venture partners, which have stated that the first phase of development will cost $43 billion.

The Gorgon partners - Chevron, Shell and ExxonMobil - today announced the expected final investment decision.

In a statement, Chevron said the project is estimated to cost about $43 billion for the first stage, below the $50 billion figure given by Premer Colin Barnett, which was never confirmed by the Gorgon partners.

Initial work will start immediately on Barrow Island with first gas planned for 2014.

The project is expected to create 10,000 direct and indirect jobs during peak construction and about $33 billion is expected to be spent on Australian goods and services with flow-on effects cascading through the state economy, Chevron managing director Roy Krzywosinski said.

The greater Gorgon area is estimated to have resource of 40 trillion cubic feet of natural gas, enough to power a city of 1 million people for 800 years, Chevron claims.

The project comprises of three trains, each able to process 5 million tonnes of liquefied natural gas.

Mr Barnett today welcomed the partners' decision at a signing ceremony at the Perth Convention and Exhibition Centre.

"Already about 1,400 people have jobs with Chevron and with contractors awarded work relating to the project," he said

"Contracts valued at approximately $2 billion have been let with a further $10 billion of contracts to be awarded in the next three months.

"The State Government has a local content policy in place and has been working with the Chamber of Commerce and Industry through the Industry Capability Network to ensure local businesses can be involved and benefit from the Gorgon project."

Mr Barnett added that while the majority of revenues for Gorgon will go to the commonwealth, he did welcome the federal government's commitment that 25 per cent of expected petroleum resource rent tax from the project, worth up to $100 million a year, will be spent on local infrastructure projects.

The Chamber of Commerce and Industry WA also welcomed the Gorgon go-ahead but has warned that challenges faced by a growing economy, such as the skills shortage, will be back.

"CCI believes it would be appropriate to direct a greater share of the Federal Government's $42 billion stimulus package and the Infrastructure Australia fund to much needed wealth creating, nation building projects in WA," chief executive James Pearson said.

The final investment decision comes days after Chevron secured Australia's largest ever resource deal with Japanese and South Korean companies for the supply of nearly 3 million tonnes of gas each year for up to 25 years.

Prime Minister Kevin Rudd last week said the deal is valued at more than $70 billion, although no confirmation was given by Chevron.

Chevron, which holds a 50 per cent stake in the project and will be its operator, also sold a 2.25 per cent interest in Gorgon to the Japanese companies.

ExxonMobil and Shell each hold 25 per cent interests.

 

 

Announcement from Chevron and Premier Colin Barnett are below:

 

 

The development of natural gas off Western Australia is entering a new era after Chevron Australia Pty Ltd, the Australian subsidiary of Chevron Corp., announced that it will proceed with the development of the world-class Chevron-operated Gorgon Project today.

The final investment decision on the project was announced by the Gorgon Joint Venture participants - Chevron (operator with 50 percent interest1), and ExxonMobil and Shell (each with 25 percent interest). The project is estimated to cost approximately AUD$43 billion for the first phase of development.

Initial work will begin immediately on Barrow Island. First gas is planned for 2014.

"Gorgon will supply cleaner burning natural gas for the growing Asia-Pacific and Australian markets, create thousands of jobs, and generate substantial revenue for Australia," said Jim Blackwell, president, Chevron Asia Pacific Exploration and Production.

The green light for the Gorgon Project was achieved after the granting of production licenses and final state development approval, which was received today at a signing ceremony attended by Western Australian State Premier the Hon. Colin Barnett, MLA and Australian Minister for Resources and Energy the Hon. Martin Ferguson AM, MP.

Speaking from the signing ceremony, Chevron Australia Managing Director, Roy Krzywosinski, thanked the Federal and State Governments for their support.

"Gorgon will be an important pillar of the Australian economy for the next 40 years," Krzywosinski said. "We anticipate AUD$33 billion will be spent on Australian goods and services with flow-on effects cascading through the Western Australian economy."

Krzywosinksi added, "Gorgon is a long term, technically complex project that will mark a step-change and dramatic advancement of engineering, developing new frontiers in up to 1300 metres of deepwater, and best practices in environmental management.

"To engineer, build and operate this project, we have brought together the best and brightest from Chevron, our partners and industry," said Krzywosinski.

The Gorgon Project is Australia's biggest single resource project and one of the world's largest natural gas projects. At peak construction it is projected to generate about 10,000 direct and indirect jobs in Australia.

The Greater Gorgon Area is estimated to have resources of 40 trillion cubic feet of natural gas, the equivalent of 6.7 billion barrels of oil. The resource contains enough equivalent energy to power a city of one million people for 800 years.

Krzywosinski added: "Gorgon will be a global leader in the application of underground carbon dioxide injection technology. The decision to invest approximately AUD$2 billion to inject naturally occurring, reservoir carbon dioxide into a deep reservoir more than 2,000 metres beneath Barrow Island, is a clear demonstration of Chevron's commitment to reducing greenhouse gas emissions."

The project's scope includes a three-train, 15 million-metric-tonne-per-annum liquefied natural gas (LNG) facility and a domestic gas plant.

 

PREMIER COLIN BARNETT

Today's historic agreement to proceed with the Gorgon project will boost the Australian economy and provide jobs for thousands of Western Australians.

Premier Colin Barnett warmly welcomed the agreement of all parties at a signing ceremony held in Perth this morning.

At the ceremony:

- the Gorgon Joint Venture participants, Chevron, ExxonMobil and Shell, announced their final investment decisions
- Premier Colin Barnett signed the final development approval required under the Barrow Island Act 2003 and the Gorgon Gas Processing and Infrastructure Project Agreement and
- the Joint Authority, Mines and Petroleum Minister Norman Moore and Federal Resources, Energy and Tourism Minister Martin Ferguson, granted production licences for the Gorgon and Jansz/Io gas fields.
Mr Barnett said he was delighted that the Liberal-National Government had been able to achieve this outcome.

"In the past 12 months, the Liberal-National Government has worked tirelessly to facilitate major developments, particularly the massive Gorgon project," he said.

"In today's dollars, the project is estimated to cost AU$43billion. With total gas resources of 40 trillion cubic feet, this will be the largest resources project in Australia's history and make a significant contribution towards Western Australia's prosperity over the next 30 years.

"Preliminary works on the three-train 15 million tonnes per annum LNG facility and the 300 terajoules per day domestic gas plant will begin this year with full construction commencing in February next year.

"The project will create about 10,000 jobs during the peak construction phase with more than 3,500 direct and indirect jobs sustained throughout the life of the project.

"Already about 1,400 people have jobs with Chevron and with contractors awarded work relating to the project," the Premier said.
"Contracts valued at approximately $2billion have been let with a further $10billion of contracts to be awarded in the next three months.

"The State Government has a local content policy in place and has been working with the Chamber of Commerce and Industry through the Industry Capability Network to ensure local businesses can be involved and benefit from the Gorgon project."

Economic modelling by analysts ACIL Tasman has indicated the Gorgon project will boost Australia's gross domestic product by $65billion, with about $33billion flowing to goods and services purchased in Australia.

While the majority of revenues from the project will flow to the Commonwealth, Mr Barnett welcomed the Federal Government's commitment that 25 per cent of expected Petroleum Resource Rent Tax from the project, worth up to $100million a year, will be spent on Western Australian infrastructure projects.

Mr Barnett said the project also marks a high point for environmental approvals in Australia.

"This project has faced what is possibly the most stringent environmental assessment ever applied in Australia," he said.

"Barrow Island has been an A class reserve since 1910 and supports at least 24 unique plant and animal species. Oil production has occurred on the island since 1964 and it is a compliment to the Gorgon Joint Venture participants that they have been allowed to proceed with this project."

The environmental conditions that have been imposed will ensure:

- Coral lost due to dredging is minimised to three per cent of the total coral off the east coast of Barrow Island
- Artificial light and noise emissions are minimised to protect the local population of northwest shelf flatback turtles
- A turtle conservation plan is in place for the life of the project
- Monitoring of other unique and endangered fauna.
The Gorgon project will also include the world's biggest carbon dioxide injection project. This will reduce greenhouse emissions by 40 per cent or 3.4 million tonnes per annum through reinjection of carbon dioxide from the natural gas into a reservoir more than two kilometres below Barrow Island.

"It is totally appropriate that the State and Federal governments have put in place such strong measures to protect the environment and we will retain a strong commitment to ensuring the highest environmental standards are met throughout the life of the project," Mr Barnett said.

The first LNG is due in 2014 and domestic gas is planned by the end of 2015. The Gorgon Joint Venture participants have already entered into long term LNG sales and purchase agreements with customers in Japan, China, India, South Korea and North America.

In WA, expressions of interest have been sought for the first 150 tj/d of domestic gas.

"In the current economic climate, enabling this project to progress will be a great boon for Western Australia," Mr Barnett said.

"As has been shown with other projects progressed by this Government in recent months, economic development can progress in partnership with industry while adhering to the highest possible environmental standards."

The Gorgon project includes:

- Development of the Gorgon and Jansz/Io gas fields in Commonwealth waters with subsea pipelines linked to Barrow Island (an A Class Nature Reserve)
- A gas processing facility on Barrow Island consisting of three 5 Mt/a LNG trains and LNG shipping facilities
- A 300tj/d domestic gas plant and pipeline to deliver gas to the mainland
- Greenhouse gas management via injection of carbon dioxide into deep formations beneath Barrow Island.

 

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