Korea Gas signs up for Wheatstone LNG
Release Date: 2010-07-20
KOREA Gas Corp has signed a preliminary agreement for delivery of LNG for up to 20 years from the Wheatstone project offshore Australia.The agreement between Chevron and its partners and the state-run KOGAS is the latest in a string of deals to supply LNG between major oil companies and customers in East Asia.
The agreement also is a significant step for Chevron in adding credibility to Wheatstone, which faces stiff competition from other projects to secure customers.
It also helps Chevron to keep on track the development of the project, about which the company confirmed there will be a final investment decision in 2011.
Oppenheimer & Co analyst Fadel Gheit said: "There is plenty of LNG coming out of Australia and obviously securing long-term supply contracts is very critical for the development of any major project."
Energy companies such as Chevron, Exxon Mobil, Royal Dutch Shell and Apache Corp are betting big on LNG to capitalise on what they expect will be a surge in demand for cleaner-burning natural gas, boosted by proximity to fast-growing Asian economies and Australia's stable political environment and substantial gas reserves. Their wager comes particularly at a time when US gas prices are low because of a flood of domestic supply.
Under the agreement, KOGAS is expected to purchase 1.5 million tonnes a year of natural gas for up to two decades, with 75 per cent of it expected to be purchased from Chevron and the remainder from its partners Houston-based Apache and Kuwait Foreign Petroleum Exploration Co.
KOGAS also signed a preliminary equity agreement to acquire a 5 per cent interest in each of Chevron's Wheatstone field licences and in the Wheatstone project LNG and domestic gas-processing facilities. Including this equity participation, KOGAS plans to take delivery of a total of about 1.95 million tonnes of LNG from the Wheatstone project, Chevron said.
The agreements represent a milestone and also "strengthen our role as a reliable future supplier of LNG," Apache chief executive G. Steven Farris said in a statement.
The agreements bring the total Wheatstone LNG under contract to almost 90 per cent of the 8.6-million-tonne-a-year combined capacity of the two trains planned in the first phase of the project, according to Paul Webber, an analyst for Australia and Asia at consultancy IHS.
This is a "significant development," he said.
Financial terms of the LNG sales and equity agreements weren't disclosed by any of the partners.
The announcement followed another agreement between KOGAS and Chevron for the delivery of LNG for 15 years from the Gorgon project, announced last year.
In October, Chevron announced it had signed a binding agreement with a subsidiary of Apache, which will assume a 16.25 per cent equity interest in the Wheatstone project, and with an Apache subsidiary, which will assume an 8.75 per cent interest in the project.
Chevron is responsible for the marketing of LNG from the Wheatstone project.
Chevron shares ended trading in New York US50 cents higher at $US72.
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| Url: | http://www.theaustralian.com.au/business/mining-energy/korea-gas-signs-up-for-wheatstone-lng/story-e6frg9ef-1225894418071 |