Pioneer builds on solid foundations

THE largest holder of natural gas resources in the country, Chevron Australia has been operating in WA since it joined Ampol Petroleum to form West Australian Petroleum in 1952. Since then, Chevron has established an impressive time line of oil and gas discoveries that have helped to pioneer energy development in Australia.
The company is a foundation partner of the North West Shelf Venture and the Browse LNG development, as well as a signifi cant investor in exploration and appraisal activities offshore north-western Australia. As operator of the Gorgon and Wheatstone projects, and the Barrow and Thevenard Island oil fields, Chevron is in the midst of an exciting era on the world energy stage. Gorgon One of the world’s largest natural gas projects
and the largest single resource natural gas project in Australian history, the Gorgon project will develop the Gorgon and Jansz-Io gas fields, about 130km off the northwest coast of WA.
It is a joint venture (JV) between the Australian subsidiaries of Chevron (about 47 per cent), ExxonMobil (25 per cent), Shell (25 per cent), Osaka Gas (1.25 per cent), Tokyo Gas (1 per cent) and Chubu Electric Power (0.417 per cent).
The Gorgon project includes the construction of a 15 million tonne per annum LNG plant on Barrow Island and a domestic gas plant with the capacity to provide 300 terajoules of gas per day to WA. LNG from the Gorgon project will be offl oaded via a 4km-long loading jetty and transported to international markets, while the domestic gas will be piped to the WA mainland.
Sales In September 2009, Chevron signed three binding long-term sales and purchase agreements (SPAs) for the supply of nearly 3mtpa of LNG to Osaka Gas, Tokyo Gas and GS Caltex, commencing in the second half of 2014.
In addition to being supplied with 1.375mtpa for 25 years, Osaka Gas agreed to purchase a 1.25 per cent stake in the Gorgon project. Tokyo Gas agreed to the supply of 1.1mtpa of LNG for 25 years and purchased a 1 per cent stake in the project. GS Caltex will receive a total of 0.5mtpa of LNG from the Gorgon project and other gas within Chevron’s global portfolio during a period of up to 20 years. “This builds upon our longstanding relationship with these companies and represents a major step towards the successful commercialisation of the Gorgon project,” Chevron Asia Pacific Exploration and Production Company president Jim Blackwell said in a statement.
Chevron Global Gas president John Gass said that Osaka Gas and Tokyo Gas were two of the most experienced LNG buyers in the largest LNG market in the world, and that the agreement with GS Caltex would
“provide our initial entry into the important Korean LNG market and GS Caltex’s first expansion from refi ning, petrochemicals and power into LNG”.
Also in September 2009, Chevron signed a heads of agreement (HOA) with Korea Gas Corporation (KOGAS) for the delivery of 1.5mtpa of LNG from the Gorgon project for 15 years.
As part of the arrangement, Chevron and KOGAS have the option to extend the agreement for a further five years. “This agreement represents the largest long-term LNG sale between Australia and Korea, and the first long-term sale between KOGAS and an Australian supplier. Korea is the world’s second largest importer of LNG and is a desirable market for LNG,” Chevron Australia managing director Roy Krzywosinski said in a statement.
In December 2009, Chevron signed a binding long-term SPA with Chubu Electric for the supply of 1.44mtpa of LNG from the Gorgon project for 25 years. In addition, Chubu agreed to purchase a 0.417 per cent stake in the project from Chevron.
“We are pleased to build on our long-term relationship with Chubu Electric, and welcome them as a foundation customer and equity participant in the Gorgon project,” Mr Blackwell said in a statement.
“The SPA with Chubu Electric continues to build momentum toward commercialising our equity natural gas in the project,” he said. In January 2010, Chevron signed another HOA: this time with Nippon Oil Corporation
for for the delivery of 0.3mtpa of LNG for 15
Mr Gass said that Chevron had a long history of working with Nippon Oil and that with this agreement they were proud to add a new dimension to that relationship. “Our agreements with Nippon Oil and other leading Japanese and Korean energy companies demonstrate that Chevron is strongly positioned to meet long-term demand growth in Asia-Pacific,” Mr Gass said.
In January 2011, Chevron signed SPAs with Kyushu Electric Power Company for a portion of Chevron’s offtake of LNG from Gorgon.
Under the binding agreement, Kyushu Electric will receive 0.3mtpa of LNG from the Gorgon project for up to 20 years, beginning in 2015.
“We are pleased to have reached this milestone with Kyushu Electric, one of the leading companies in the world’s largest LNG market, and we look forward to expanding this relationship in the future,” Mr Gass said in a statement.
The other Gorgon stakeholders, ExxonMobil and Shell, have also signed SPAs for their share of the LNG. In November last year, Chevron signed domestic gas sales agreements that would help to boost WA’s future energy security.
Under the agreements, gas from the Gorgon project will be purchased through long-term contracts by WA’s largest energy retailer Synergy and its leading energy generator Verve Energy. Both companies entered into contracts for a combined 125TJ of gas per day for a 20-year term starting in 2015.
“We are pleased to have finalised two significant long-term domestic gas sales contracts for the Gorgon project, and we welcome Synergy and Verve as valued customers,” Mr Krzywosinski said in a statement.
He said that domestic gas was an important energy source for WA, and that these contracts meant more gas and competition for the local market. “It demonstrates the market is working. We have been actively marketing domestic gas from Gorgon and we will continue to do so,” Mr Krzywosinski said. WA Energy, Training and Workforce Development minister Peter Collier attended the singing of the agreements and said that they provided long-term and reliable domestic energy supply that would enable WA to maintain a strong and vibrant economy in conjunction with an additional stream of energy security. “These contracts are of strategic
importance to the state and provide a firm foundation for Verve’s and Synergy’s gas portfolios, both of which are expected to grow significantly in the future,” Mr Collier added. He also said that the announcement of the
supply agreements was timely as the focus on major projects such as Gorgon delivering benefits to the community was always “front of mind” for West Australians.
“With the state’s vast supply of natural gas our state has prospered, with domestic use fuelling our state’s growth and development while exports have contributed to our economic success,” he said. The Gorgon project is due to deliver gas to the domestic market in 2015. Economic benefits When the final investment decision (FID) for the Gorgon project was made in September 2009, WA Premier and State Development minister Colin Barnett said it would boost the Australian economy and provide jobs for thousands of Western Australians. “In today’s dollars, the project is estimated to cost $43 billion. 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,” Mr Barnett said in a statement. “The project will create about 10,000 jobs during the peak construction phase, with more than 3500 direct and indirect jobs sustained throughout the life of the project.” Mr Barnett said that the WA Government had a local content policy in place, and that it had been working with the Chamber of Commerce and Industry through the Industry Capability Network to ensure local businesses could be involved in and benefit from the Gorgon project.
Economic modelling by analysts at ACIL Tasman indicated that the Gorgon project would boost Australia’s gross domestic product by $65 billion, with about $33 billion flowing to goods and services purchased in
Mr Barnett said the project also marked 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 Gorgon development will also include the world’s biggest carbon dioxide injection project, which will reduce greenhouse emissions by 40 per cent (or 3.4mtpa) through the reinjection of carbon dioxide from the natural gas into a reservoir more than 2km 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.
In July 2011, Chevron awarded one of the biggest contracts ever to have been signed in WA. Set to deliver more than 1650 jobs and boost WA’s economy by $2 billion, the mechanical, electrical, instrumentation and commissioning support contract was awarded to the CB&I Kentz JV. It includes equipment pre-dressing and pre-assembly plus above-ground mechanical, electrical and instrumentation installation works at the gas processing plant.
In a statement, Mr Barnett said that contracts like these showed that local industry could be internationally competitive for appropriate work scopes. “These jobs on the Gorgon project are now spread right through the Perth metropolitan area – including the Kwinana area, in the Pilbara at Dampier, at Northam in the Wheatbelt, on Barrow Island and right across Australia,” Mr Barnett said. The Gorgon project remains on track to deliver $20 billion in Australian industry participation (local content) expenditure during its initial construction phase, with more than 90 per cent of this fl owing to WA. As of July 2011, more than $13 billion had been committed to Australian industry and more than 4000 jobs had been created. “This Government continues to work hard with major resource proponents to ensure a fair proportion of their project work is awarded to local companies,” Mr Barnett said.
In a Gorgon Project Update that was released towards the end of last year, Chevron stated that the Gorgon project had achieved several key milestones in the previous couple of months, and that visible progress was being made across key project areas. In the document, Greater Gorgon Area general manager Colin Beckett said that the project remained on schedule to deliver first gas in 2014.
“As activity on the project increases and our workforce grows, we remain vigilant about safety and continue to look out for one another as well as the environment on Barrow Island,” Mr Beckett said.
The document stated that more than 2500 people were working on and around Barrow Island. As part of the accomplishments, three clusters of two-storeyed accommodation blocks at the Gorgon Construction Village
were fully operational, with construction of a fourth well under way. The Pioneer Materials Offloading Facility had been connected to the Barrow Island causeway, and more than 10 million kilometres of road transport journeys and more than 3000 line haul trips had been completed without incident or injury. At the shore crossing site, nine holes
had been drilled through to the seabed and preparations were under way for the insertion of the almost 1km-long pipe strings. Offshore, the Northern Scarp soil trenching had been completed in preparation for the installation of the pipelines that would eventually connect the Jansz-Io fi elds to the processing plant on Barrow Island. The report stated that earlier in the year, during July, a major milestone was reached when the Atwood Osprey drilling rig spudded the first of eight Gorgon development gas wells, marking the beginning of a two-year drilling campaign at the Gorgon field. “Gorgon redefines what technically complex,
environmentally-responsible projects will look like – so how we deliver this project will set a new standard for the world to see and emulate,” Gorgon Upstream Development manager Kevin Shannon said in the document.
The Atwood Osprey was built by Jurong Shipyard in Singapore for Atwood Oceanics, and is a sixth-generation, ultra-deepwater semi-submersible rig that is able to conventionally moor in up to 2438m of water
and accommodate up to 200 people.
Another one of Australia’s largest resource developments, the $29 billion Wheatstone project will help to propel Chevron into the position of being one of the largest LNG producers in the world. The company plans to construct and operate a two-train LNG facility and a domestic gas plant at Ashburton North, 12km west of Onslow on the Pilbara coast.
Initial capacity from the two trains is expected to be a combined 8.9mtpa, although eventually the project may expand to produce up to 25mtpa of LNG. Following a FID that was announced in late September 2011, the
project requires the installation of gas and condensate gathering, processing and export facilities offshore and onshore. Construction is under way and fi rst LNG shipments are planned for 2016.
Chevron holds a 73.6 per cent stake in the project while the local subsidiaries of Apache Corporation (13 per cent), Kuwait Foreign Petroleum Exploration Company (KUFPEC, with 7 per cent) and Shell (6.4 per cent) have become equity participants.
On December 1 2011, Chevron officially began the construction of the Wheatstone project and commemorated it with a special groundbreaking ceremony. Senior executives from Chevron, Apache, KUFPEC and Shell were joined at the site by Mr Barnett, along with other invited guests.
“We’re constructing a facility that will benefit generations,” Chevron Corporation vice chairman George Kirkland said in a statement.
In July 2011, Chevron signed SPAs with Tokyo Electric Power Company (TEPCO) to deliver (together with Apache Energy and KUFPEC) up to 3.1mtpa of LNG from the Wheatstone project for a period of up to 20 years.
In a statement, Mr Gass said that Chevron welcomed TEPCO as a foundation customer and potential investor in the Wheatstone project.
“TEPCO is one of the world’s leading LNG customers. Its support for Chevron’s Wheatstone project reinforces the strength ofthe relationship between the two companies that has been built up over many years,” he
At the time, Mr Krzywosinski said that the Wheatstone project had completed the front-end engineering and design phase, and that the TEPCO agreements, along with other LNG agreements that Chevron was finalising, gave Wheatstone great momentum.
“The Ashburton North site earmarked for the LNG processing plant is ideally located to unlock the signifi cant gas resources in the western Carnarvon Basin,” he said. In September 2011, Chevron signed another SPA with Kyushu Electric: this time, to supply, along with Apache and KUFPEC, up to 0.7mtpa of LNG for up to 20 years. As part of the deal, Kyushu Electric also acquired a 1.83 per cent stake in Chevron’s share of the Wheatstone field licences and a 1.46 per cent interest in the Wheatstone natural gas processing facilities. Including the equity participation volume, Kyushu Electric will take delivery of 0.8mtpa of LNG from the Wheatstone project.
In a statement, Mr Gass said the SPA was an important milestone as Chevron progressed towards its FID, which had yet to be announced at that point.
“We are pleased to build on our relationship with Kyushu Electric as a long-term customer of the North West Shelf Venture,” Mr Gass said.
The effects of the benefits from the Wheatstone project will ripple right across Australia. One aspect to support this is Chevron’s estimation that Wheatstone will create 6500 direct and indirect jobs during peak construction plus 300 new operational jobs, and deliver an estimated $17 billion to Australian and WAbusinesses and services during the life of the project.
In a statement released in September 2011, Mr Barnett said that Wheatstone was creating “enormous” employment and industry participation opportunities for the state and transforming Onslow while cementing WA’s status as a major global energy provider.
“Western Australian-based companies have already secured contracts worth nearly $500 million since the fi nal investment decision was made in late September 2011. To date, contracts have been awarded for engineering, construction, accommodation and air services,” Mr Barnett 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 helps ensure a safe, secure and reliable supply of gas to meet the state’s energy requirements into the future.”
Mr Barnett said that Wheatsone would deliver signifi cant benefi ts for the local community, with Chevron, its partners and the WA Government spending approximately
$250 million on community and public infrastructure in Onslow, including the upgrade of the town’s water and electricity supplies.
Together with other LNG projects that are currently under construction and the existing North West Shelf operations, Wheatstone will boost WA’s current LNG production from 17mtpa to 45mtpa within the next few years.
“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 Barnett said.

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