Megaprojects for supermajor

WITH an ancestry dating back to the late 19th century, Chevron has seen it all.
Through various name changes and major wars, the multinational company has worked on every continent except Antarctica and engaged in almost every sector of the energy industry.
Chevron has been operating in Australia for more than 60 years, developing a diversified oil and gas portfolio.
It is a ‘supermajor’ oil company, meaning it is one of the world’s six largest publicly-owned oil and gas corporations.
According to its 2010-2011 annual report, Chevron’s revenue totalled more than $253 billion, valuing each of its shares at about $13.44.
Along with Woodside Petroleum, BP, BHP Billiton, Royal Dutch Shell and Japan Australia LNG, Chevron is a foundation partner in the North West Shelf Venture; each company owns a one-sixth share.
In addition to the North West Shelf Venture, the Gorgon and Wheatstone projects have consolidated Chevron’s position as one of the world leaders in the LNG industry.
A project 40 years in the making and, at $43 billion, the single most expensive investment of its kind in the world, Gorgon is one of the world’s largest gas developments.
The Gorgon Joint Venture partners comprise Chevron, Exxon Mobil, Royal Dutch Shell, Osaka Gas, Tokyo Gas and Chubu Electric Power.
According to Chevron, the project takes its name from the local area known as the ‘Gorgon Patch’, which in turn was named after a ship that frequented the region, the SS Gorgon.
The Gorgon gas fields are about 130km off WA’s northwest coast and contain an estimated 40 trillion cubic feet of gas, making them the largest undeveloped gas resource in the country.
The JV, which is undertaking  development of the gas fields and Barrow Island, was granted final approval by WA Premier Colin Barnett in late 2009.  Chevron general manager for the greater Gorgon area Colin Beckett said  he was excited about the huge potential of the project.
“There is a real sense of energy flowing though the Gorgon project participants and team, and a determination to deliver on the development of this world class resource,” Mr Beckett said.
Long-term sale and purchase agreements include 25-year deals with Osaka Gas (1.375 million tonnes per annum and 1.25 per cent equity), Tokyo Gas (1.1mtpa and 1 per cent equity) and Chubu Electric (1.44mtpa and 0.417 per cent equity).
Chevron has also signed export deals with GS Caltex (500,000 tonnes per annum for 20 years), and heads of agreements with Korea Gas (1.5mtpa for 15 years) and Nippon Oil Corporation (3000,000tpa for 15 years).
Expected to be completed by 2015, the Gorgon JV is projected to supply up to 300 terajoules of gas per day to the WA market.
This will satisfy the Barrow Island Act 2003, which stated that at least 2000 petajoules of gas must be reserved for the local market.
“Bringing on Gorgon’s domestic gas phase earlier will increase the number of supply points for domestic gas into WA,” Mr Beckett said.
“We see Barrow Island providing another physical hub for domestic gas production, thereby improving the state’s security of gas supply.”
Economic benefits
The Gorgon JV has committed more than $9 billion to Australian contractors, however the total figure could reach $20 billion during construction of the project.
“The Gorgon project is the modern-day resources equivalent of the Snowy Mountains Hydro-Electric Scheme and will globally showcase Australian development skills and capability,” Mr Beckett said.
Mr Beckett said he believed that thousands of jobs would be created inthe state, and that the project would deliver a raft of supply and construction opportunities for local businesses.
“While developments such as Gorgon require large capital expenditure overseas, we are working hard to ensure local content opportunities for local contractors are realised,” he said.
The project’s foundation development includes subsea gas production and pipelines plus three LNG trains on Barrow Island, each capable of producing  5mtpa.
The project is expected to boost Australia’s gross domestic product by about $64.3 billion across a period of 30 years.
Mr Barnett welcomed the awarding of contracts to local businesses.
“The awarding of [contracts] to a local manufacturer demonstrates that the local industry can be internationally competitive for appropriate for work scopes,” he said.
“Chevron’s Gorgon project…has already delivered more than $9 billion and 3000 jobs to the Australian industry: about 90 per cent of them right here in WA.
“These jobs are spread right through the metropolitan area of Perth – including the Kwinana area, in the Pilbara at Dampier, and on Barrow Island and across Australia.
“Gorgon is expected to spend about $20 billion on Australian goods and services in the next four to five years, and $33 billion in the project’s first 30 years.”
Under the terms of Gorgon’s State Agreement, the JV is required to give preference to local suppliers where price, quality, delivery and service are equal to or better than can be obtained elsewhere.
Commerce minister Simon O’Brien said it was important for local industry to be given priority during the construction of the project.
“As the Gorgon project progresses, more and more local industry work will be required,” Mr O’Brien said.
Environmental protection Originally mistaken as part of the Australian mainland by explorers, Barrow Island is now a Class ‘A’ Reserve (the highest classification for a nature  reserve), and is known to host a variety of rare and endangered species.
In combination with the WA Government, the Gorgon JV has implemented a number of strict policies and procedures to protect the environmental integrity of Barrow Island and the surrounding area.
The joint venture has invested investing in a revolutionary carbon dioxide capture and storage facility that   will store the gas several kilometres directly beneath Barrow Island.
Chevron claimed that the project’s environmental management would be world-leading, with the potential to place WA at the forefront of cutting-edge 21st century technology.
While only about 300 hectares (or 1.3 per cent) of Barrow Island’s 26,600ha island is being used for development, 1550 animals have been killed, 377 of  which were from vulnerable or threatened species.
Gorgon project development director Scott Young said the JV was implementing unique strategies to maximise its limited space.
“We are committed to maintaining the existing environment on Barrow Island  and by using modular construction, it greatly reduces the laydown or open space required on the island,” he said.
“Most LNG projects have unlimited space available but for Gorgon we are constrained to a total of 300 hectares for the entire development. “It will also reduce workforce hours on
Barrow Island, and enable site preparation and civil works to be conducted in parallel with modular construction.”
More than 20 environmental management plans are being implemented    on the island, and the JV partners  agreed to spend more than $150 million on conservation initiatives.
One of the main undertakings is the preservation of the rare flatback turtles.
Endemic to the northern part of Australia, the species is considered vulnerable to extinction.
The JV will invest $62.5 million during the life of the project (about 60 years) on the North West Shelf Flatback Turtle           Conservation Program and will spend an
extra $5 million in the event that turtles are adversely affected by the project.
In order to monitor the marine life in the area, the Department of Environmental and Conservation willmaintain a permanent management presence on Barrow Island
More than 300 procedures, specifications and checklists are being used to protect the island and its surrounding marine life.
The JV has also made efforts with its strictly enforced quarantine protocol, which  is regarded as the most robust in the world.
Quarantine manager Johann van der Merwe shared his belief that conservation and development could operate in tandem. “Our quarantine system is demonstrating that sustainable resources development can occur in ecologically-sensitive areas,” he  said.
“The QMS [Quarantine Management System] is likely to establish a new global standard and illustrates what can be achieved when community, government and industry work together.
“The system can be replicated in other regions of the world – by governments, local authorities and projects – to protect the environment.”
According to Chevron, the Wheatstone name comes from the Wheatstone Channel in the Montebello Islands: an archipelago of 174 small islands 130km off the Pilbara    coast.
The Montebello Islands are about 25km north of Barrow Island and 95km south of the Wheatstone gas field.
The Wheatstone LNG project will be operated by Chevron, and will cost about $29 billion to develop.
The company owns a little more than 70 per cent of the project, with the remaining shares owned by Apache Energy (13 per cent), Kuwait Petroleum (7 per cent) Royal Dutch Shell (6.4 per cent), and Kyushu Electric (1.6 per cent). 12km west of Onslow on the Pilbara coast of WA, the project comprises a two-train LNG facility and a domestic gas plant at the
Ashburton North Strategic Industrial Area. Construction began in December 2011 and it is hoped that the most advanced LNG plant in the world will produce about 8.9mtpa, with the possibility of this figure rising to 25mtpa from 2016.
About 80 per cent of the initial LNG produced has already been sold to customers in Japan and South Korea including Tokyo Electric Power Company, Kyushu Electric, Chubu Electric and Tohoku Electric.
The LNG produced by the project’s two initial trains will represent more than a quarter of Australia’s total gas production, and will deliver 200 terajoules per day to the WA market.
Chevron has estimated that more than $17 billion dollars will be invested in local business during the life of the project, creating 6500 jobs during peak construction.
Offshore components of the project include well infrastructure and subsea installation at the Wheatstone field, and a 225km trunk line to transport gas from the processing platform to the Ashburton site for connection to the Dampier to Bunbury gas pipeline.
At 35,000t, the platform is designed to withstand 12-storey waves. It will process the gas, including drying, dewatering andcompressing stages.   Construction at the Ashburton plant
will include a slugcatcher to separate gas and liquids, LNG storage facilities and workers’ accommodation.
Mr Barnett hailed the project as an  exciting milestone for WA.
“Wheatstone is creating enormous employment and industry participation opportunities for the state and transforming Onslow, as well as cementing  WA’s status as a major global energy  provider,” he said.
“The construction of a $1.2 billion domestic gas plant to feed 15 per cent of the gas from the Wheatstone operations into the state’s energy market is also a    very important component of the overall project.
“This will also position WA as the world’s second-biggest supplier of LNG and well on the way to increasing WA LNG production to more than 60 million tonnes a year by 2020.”
Mr O’Brien said contracts for Wheatstone would only be awarded overseas if no local tenders were offered.
“The State Government supports locally-based businesses receiving full, fair and reasonable opportunity to participate in the resources market, and we seek feedback from international proponents such as the Chevron joint venture on their performance,” Mr O’Brien said.
“The recently commenced Wheatstone development has already resulted in   almost $4 billion of contracts going to Australian suppliers: $3.2 billion of this with WA companies.
“Local activity has been stimulated by an extensive range of contracts covering  areas including upstream construction, platform engineering, inspection services and logistics.
“It should also be remembered that these projects don’t just have longevity but are responsible for significant           upfront investment.”

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