Commissioning Troubles Continue at Gorgon LNG
On Tuesday, Chevron reported continued problems with liquefaction Train 1 at its Gorgon LNG plant in Western Australia.
On November 30, Chevron shut down the train to "assess some recent performance variations," a spokeswoman said.
A spokesman said Tuesday that Train 1 remains shut down, but noted that Train 2 is up and running. Train 2 was also taken offline briefly on December 7.
Gorgon’s Train 1 has experienced a number of shutdown events, including a gas leak on July 1 which prompted an evacuation of the facility.
The supply disruption has has a positive effect on the Pacific basin LNG market, with spot prices hitting more than $8 per mmbtu on Friday, above long-term contract rates – the first time in two years that the spot market has been higher than contract pricing.
When fully built out, Gorgon will have three trains with a combined capacity of 15 mtpa. Together with the 8 mtpa Wheatstone project, its operations are expected to make Chevron into Australia's largest LNG producer.
Chevron invests, but less than before
Chevron announced December 8 that it would be spending $2 billion on its Gorgon and Wheatstone projects in 2017. Overall, its worldwide capital investments will be 15 percent less than funds expended in 2016 and 40 percent below the levels spent in 2015.
Chevron's cost estimates for Gorgon have gradually risen to a total of $54 billion. At the time of final investment decision, the projected cost stood at $37 billion. Analysts say that a combination of market timing, labor disputes, exchange rates and environmental rules conspired to raise expenses during construction.
Chevron owns 47 percent of Gorgon, and it is the project operator. Its partners include ExxonMobil and Shell.
The consortium has signed long-term take-or-pay purchase agreements with Asian buyers, giving it a nearly-guaranteed revenue stream once production is fully online.
“We expect legacy assets such as Gorgon will drive long-term growth and create shareholder value for decades to come,” John Watson, Chevron’s chief executive, told the Wall Street Journal in March.