Chevron pleased with off-take agreements for LNG projects

Release Date: 2011-01-31

ENERGY giant Chevron has assured investors that it has enough customers already signed up for its Wheatstone and Gorgon liquefied natural gas projects to be given final approval later this year.

In a conference call for the company's fourth-quarter earnings on Friday night, chairman and chief executive John Watson said the company was "really pleased" with the off-take agreements it had secured for both projects.

"We're at the 80 to 90 per cent level for both projects in terms of agreements that we have in place, and we certainly don't view sales agreements as an impediment to a final investment decision for Wheatstone," Mr Watson said. Chevron signed a multi-billion-dollar binding agreement last week to supply liquefied natural gas from Gorgon to Japan's Kyushu Electric, which has also signed a heads of agreement for LNG supply and equity sales from Wheatstone.

Mr Watson also dismissed suggestions the company should be concerned about rising cost pressures at Gorgon, saying they would not result in any delays at the $43 billion project.

"In terms of cost pressures, we're going through the engineering work now and we expect, based on what we're seeing, that we'll have a good handle on costs sufficient to make a final investment decision later in the year," he said.

"Gorgon is a $US37bn project but we have let contracts totalling about $US25bn so far, so we have a good idea what's in the marketplace, we're monitoring it well and I don't expect that those cost pressures, which are real, will impact on the final investment decision.

"We have got a pretty good idea of where they (cost pressures) come from and how to mitigate them."

Mr Watson said Chevron had made five gas exploration discoveries in Australia during the December quarter, bringing to nine the number of new discoveries since Gorgon was sanctioned in 2009. "These additional volumes will support expansion opportunities at both Gorgon and Wheatstone," he said.

Chevron reported fourth-quarter earnings of $US5.3bn, up 70 per cent from the same period a year earlier, as a result of higher prices and sales volumes.

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