Nearly two thirds of the LNG to be produced by Australia’s biggest ever resource development has already been committed to buyers.
Chevron, lead operator of the Gorgon gas project, has announced in an investor update that 65 per cent of the liquefied natural gas (LNG) that the project will produce has already been committed to buyers by means of long-term contracts.
Chevron also indicated that the project is 78 per cent complete, with offshore pipe laying already finished, although the start-up date of first gas for Gorgon has been pushed back from the first quarter of 2015 to the middle of the same year.
News of the advanced sale of Gorgon's output should nonetheless come as some mild relief for Gorgon's backers, given the massive cost blowout of the project.
The cost of Gorgon, Australia's biggest LNG project, has risen to a staggering US$54 billion, from its original budget of US$37 billion in 2009 when it first obtained the go-ahead from authorities.
The Gorgon Project is situated between 130 and 220 kilometres off the northwest coast of Western Australia, and encompasses the Gorgon and Jansz-lo gas fields.
The Chevron-led project is one of the biggest natural gas projects in the world, as well as the single largest resource undertaking in the history of Australia.
Once operation commences, the project is expected to have a production rate of 15.6 million tonnes of LNG per annum, and 300 terajoules of domestic gas per day.
Several of the minority stakeholders in the joint venture operating the Gorgon Project are Japanese utilities eager to access overseas sources of LNG, including Osaka Gas with a 1.25 per cent stake, Tokyo Gas with a one per cent stake, and Chubu Electric Power with a 0.417 per cent stake.
Chevron is highly optimistic about LNG's medium term prospects, given expectations that it will oust iron ore as Australia's biggest earning export within the next two decades.
The company forecasts that global LNG demand is set to nearly double in the next decade, and that 100 million tonnes of new supply a year will be needed to satisfy growing global energy demand.
Chevron also announced that its other major LNG development in Australia, the AU$29 billion Wheatstone project, has already obtained buyers for 85 per cent of its future output by means of long-term contracts, despite only being 30 per cent complete.