Chevron Unveils Another Gorgon Cost Blowout

Friday, December 13th, 2013
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The cost of building Australia’s largest resource construction project has blown out by a further $US2 billion, the company behind the development has acknowledged.

In a statement issued on Wednesday (US time), Chevron said the estimated cost of building its Gorgon LNG project in the north-west of Western Australia is now $US54 billion ($A55 billon), with the scheduled date for startup and first gas now pushed back to mid-2015 – a long way off the $US37 billion cost (revised to $US52 billion a year ago) and start date of the beginning of next year flagged by the company in 2009 and a reflection of the extent of the company’s struggle to contain costs amid what it has previously cited as high labour costs, logistical challenges due to the remoteness of the site and weather related delays.

Involving development of the Gorgon and Jansz-lo gas fields located in the Gorgon area between 130 kilometres and 220 kilometres off the north west coast of Western Australia, Gorgon is claimed by Chevron to be Australia’s largest ever resource project.

Construction includes a three-train, 15.6 million tonnes per annum LNG facility on Barrow Island, a domestic gas processing plant with the capacity to supply 300 terajoules of gas per day to Western Australia, marine facilities including a 2.1 kilometre jetty from which gas will be transported to international markets and pipelines which run from the two gas fields to the Barrow Island facilities as well as a domestic gas pipeline that runs 90 kilometres from Barrow Island and connects with the Dampier to Bunbury Natural Gas Pipeline on the Western Australian mainland.

Company Vice Chairman says the company is applying lessons learned from Gorgon, which has been under construction for four years and is around 75 percent complete, to the company’s $25 billion Wheatstone project which is around 25 percent complete.

He says combined, the two projects will form the company’s most important legacy assets, with a combined production capacity of 400,000 barrels per day.

Overall, Chevron says it expects to spend $39.8 billion in capital investment around the world – down a fraction from the $42 billion it expects to spend this year.

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