US major Chevron will begin work immediately at its Wheatstone LNG project in Western Australia after making a final investment decision on the A$29 billion ($28.4 billion) project, the company said Monday.
The Chevron-operated project involves the development of offshore gas reserves in the Carnarvon Basin and the construction of two LNG production trains, with combined capacity of 8.9 million mt/year. The onshore complex, to be built at a site at Ashburton North, 12 kilometers (8 miles) west of the town of Onslow, will also host a 200 terajoule/day domestic gas plant.
The onshore foundation project is held by Chevron (73.6%), Apache Corporation (13%), Kuwait Foreign Petroleum Exploration Company (7%) and Shell (6.4%).
The Wheatstone and Iago fields, owned in a joint venture by Chevron and Shell, will provide 80% of the foundation plant's gas requirement. The remaining 20% will come from Apache and Kufpec's Julimar and Brunello gas fields, which are owned 65:35 by the two companies and are to be developed separately by them.
"The Wheatstone project represents Australia's first natural gas infrastructure hub that has attracted third-party natural gas," Chevron Australia Managing Director Roy Krzywosinski said in a statement. "This unique project is a game changer for the industry enabling the future development of Chevron's vast natural gas resources, as well as third-party natural gas located offshore Western Australia."
The Wheatstone project was granted final government approvals for a 25 million mt/year LNG facility, allowing the future addition of another three production trains.
First gas from Wheatstone is expected in 2016, two years after Chevron is scheduled to begin producing from its operated Gorgon LNG project on Western Australia's Barrow Island. The A$43 billion Gorgon project will have a capacity of 15 million mt/year of LNG at three production trains.
Japan's Kyushu Electric earlier this month signed a binding sales and purchase agreement to lift 700,000 mt/year of LNG from Wheatstone, and has taken a small equity stake in the project entitling it to another 130,000 mt/year.
Tokyo Electric Power Company also has a binding sales and purchase agreement to lift up to 3.1 million mt/year of Wheatstone LNG. The Japanese utility is still in talks for an 11.25% equity stake in the processing facilities which would entitle it to another 1 million mt/year, Platts reported previously.
Chevron has a separate heads of agreement with Korea Gas Corporation for the purchase of 1.5 million mt/year of Wheatstone LNG. Kogas is also understood to be in discussions to take a 5% equity stake in the project, which would boost its offtake to around 1.95 million mt/year.
"About 60% of Chevron's equity LNG offtake is under binding long-term agreements," the company said Monday. "Discussions are continuing with potential customers about equity agreements and associated planned equity sell-downs to increase long-term offtake to more than 80%," Chevron added.
The Australian LNG industry currently comprises the Woodside Petroleum-led 16.3 million mt/year North West Shelf project and the 3.6 million mt/year Darwin LNG project, operated by ConocoPhillips.
But the sector is enjoying a boom on both sides of the country. In the west, in addition to Gorgon, Woodside is close to completing its 4.3 million mt/year Pluto project, and Shell recently sanctioned a 3.6 million mt/year floating LNG facility at its Prelude gas field in the Timor Sea.
On the east coast, three coalseam gas-based LNG projects have been approved and are under construction on Curtis Island in Gladstone by UK-based BG Group (8.5 million mt/year); a consortium led by Australia's Santos (7.8 million mt/year); and a joint venture between US major ConocoPhillips and local partner Origin Energy (9 million mt/year).
Meanwhile, Japan's Inpex Corporation is expected to take a final investment decision before the end of this year on the development of its Ichthys field in the Browse Basin off Western Australia, which would supply an 8.4 million mt/year LNG plant in Darwin. Woodside and its partners are also working toward FID in mid-2012 on the 12 million mt/year Browse LNG project, located at a site in Western Australia's Kimberley region.
"The Wheatstone project will deliver an estimated 6,500 direct and indirect jobs during peak construction, generate an estimated A$20 billion in government revenue, and provide an estimated A$17 billion to Australian businesses and services over the project life," Krzywosinski said.
"This project will help position Western Australia as the world's second-biggest supplier of LNG," state premier Colin Barnett said in a statement. "Wheatstone, along with other committed LNG projects and the North West Shelf, will produce a combined 45 million mt/year of LNG within the next few years, which will account for 25% of current world production levels."
Barnett added that the production of domestic gas at Wheatstone, required under Western Australia's 15% reservation policy, would ensure secure and reliable supplies for the state.
