Greater Gorgon LNG development reaches next stage

July 1, 2005
Australia's $11 billion (Aus.) Greater Gorgon LNG development project has advanced to front-end engineering and design stage.

Rick Wilkinson
OGJ Correspondent

MELBOURNE, July 1 -- Australia's $11 billion (Aus.) Greater Gorgon LNG development project has advanced to front-end engineering and design (FEED) stage.

In the next 12 months, project operator Chevron Corp. will award a total of $100 million (Aus.) in contracts for both upstream and downstream aspects of the work, therefore leading to a formal investment decision from all involved parties by mid-2006. Based on that timetable, first gas is expected to flow in 2010.

Contract details
The upstream contract will cover all of the offshore work, including subsea production facilities and pipelines on and from the two major fields in the complex, Gorgon and Janz. The work will be awarded to Australian contractors JP Kenny and Technip.

The downstream contract, including a 2-train LNG facility and a domestic gas plant on Barrow Island, will go to a joint venture of Kellogg, Brown & Root, Clough, Hatch, and JGC. The two LNG trains each will have a capacity of 5 million tonnes/year.

Perth in Western Australia will be the focus for most of this FEED work, although process design will be done in Houston.

The move to FEED follows a framework agreement signed in April between Chevron, Royal Dutch/Shell Group, and ExxonMobil Corp. for a joint development of the main fields. This move combined individual participant equities in 10 retention leases in the Gorgon and Greater Gorgon region of the North West Shelf in a form of unitization that saw Chevron emerge with 50%, while ExxonMobil and Shell each have 25%.

The new ownership structure was widely acknowledged as a step to bring forward the development of the larger Janz field, which lies 50 km north-northwest of Gorgon and is operated by ExxonMobil. Janz also has a much lower carbon dioxide content than the 12% figure for Gorgon.

The Greater Gorgon fields contain an estimated 40 tcf of gas reserves. Of this amount, Gorgon holds about 9.5 tcf and Janz, 20 tcf.

Chevron signed an initial agreement in October 2003 with China National Oil Co. to supply as much as 100 million tonnes of LNG over a 25 year period. Other markets are being pursued in Japan and South Korea.

In April Shell committed its share of the LNG production from the project (2.5 million tonnes/year) to the Energia Costa Azul reception terminal in Baja California, now under construction. Shell holds 50% of that terminal's capacity rights.

Historical perspective
A discovery history of the Greater Gorgon region northwest of Barrow Island illustrates the accelerated success rate and increasing interest in gas in recent years. West Tryal Rocks—a Triassic age reservoir—in 1973 was the first find. Unfortunately for West Australian Petroleum (WAPET), it was preceded and dwarfed by Woodside's North Rankin, Goodwyn and Angel discoveries 12 months earlier and was never able to compete.

WAPET went on to find the Spar field in Lower Cretaceous sediments during 1976, but again the company found itself competing with the Woodside group in a tight buyer's market. The massive Gorgon reservoir was next in 1981 and this discovery provided the initial impetus for today's project.

Even so, with Woodside's North West Shelf Project under way, there was little room for another major gas development during the 1980s and it was not until the discovery of Chrysaor in 1994-95 and Dionysus in 1996 that WAPET again contemplated markets for its mounting reserves base.

Then came Geryon and Orthrus in 1999 and Urania and Maenad in 2000. Chevron (by now emerged from the WAPET reconstruction) also found gas in Jansz-1 during 2000 prompting ExxonMobil to look in the adjacent permit with Jansz-2 in 2002 confirming a massive 20 tcf accumulation that rivaled the known reserves at Gorgon.

Chevron went on to find Io and Iago in 2001 and Wheatstone in 2004.

It is now 32 years since the initial West Tryal Rocks discovery and 24 years since Gorgon gave explorers at Chevron, Texaco, Shell, and Ampolex (all shareholders in WAPET) a glimpse of potential development.