KBR Joint Venture Wins Chevron FEED Contract for Australia's Gorgon Liquefied Natural Gas Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Australia Pty Limited (Perth, Australia), a subsidiary of Chevron Corporation (NYSE:CVX) (San Ramon, California), has awarded the $200 million front-end engineering and design (FEED) contract for the Gorgon Liquefied Natural Gas (LNG) project to Kellogg Joint Venture - Gorgon (KJVG). KJVG, formed in January 2005, is a partnership between leading engineering, procurement and construction company KBR (NYSE:KBR) (Houston, Texas), Clough Limited (ASX:CLO) (Perth, Australia), JGC Corporation (TYO:1963) (Tokyo, Japan) and Hatch Associates Pty Limited Group (Brisbane, Australia). The Gorgon project, located on Barrow Island, aims to develop the extensive gas fields located off the coast of Western Australia. For more information, see related December 8, 2008, news article - Chevron Consortium to Make Final Investment Decision on Gorgon LNG Project Next Year.

The gas reserves in this area are estimated to be in excess of 40 trillion cubic feet. Chevron Australia, which is the operator of the gas processing facility, holds a 50% stake in the project, while Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) and ExxonMobil (NYSE:XOM) (Irving, Texas) hold 25% each. The scope of the FEED will include a 300-terajoule-per-day gas plant and three LNG trains, each with a capacity of 5 million tons per year. The project, estimated to cost around $20 billion, will have the work authorization scope carried out from two operating stations in Perth and London.

The Gorgon project will include laying the undersea gas network, developing and building the gas-processing facility and the construction of LNG-shipping facilities. The undersea gas-gathering system, which will consist of undersea trees, cluster manifolds, development wells, structures for pipeline termination and control systems, will be set up on the sea bed at a depth of 200 to 1,300 meters.

Most of the underwater equipment will be made of anti-corrosive alloys. The operations will be controlled remotely from the gas-processing unit on the island. The gas-processing facility will include three LNG trains with a combined capacity of 15 million tons per year, a carbon-dioxide injection unit, a facility to handle condensate, and other allied infrastructure. Carbon-dioxide injections into the sea depths will be carried out to prevent greenhouse gas emissions. A jetty will also be constructed that is expected to handle a minimum of three export shipments per week. The gas processing unit will separate light-oil condensate and LNG. The gas will then be processed to remove mercury, water vapor, hydrogen sulfide and carbon dioxide. The stabilized condensate and the treated gas will be exported to international markets.

Shell has signed an agreement with the Sempra Energia Costa Azul LNG terminal in Baja California, Mexico, to carry LNG to North America. Gujarat State Petroleum Corporation Limited (Gandhinagar, India) has signed a memorandum of understanding to buy 500,000 tons per year of LNG, while Petro China Company Limited (NYSE:PTR) (Beijing) as agreed to buy 1 million tons per year for the next 20 years. Chubu Electric Power Company Incorporated (TYO:9502) (Nagoya, Japan) and Osaka Gas Company Limited (TYO:9532) (Osaka, Japan) will each buy 1.5 million tons per year of natural gas, while Tokyo Gas Company Limited (TYO:9531) (Tokyo) has signed a deal to purchase 1.2 million tons per year. All three Japanese agreements are for a 25-year period. Chevron also has an agreement with GS Caltex (Seoul, South Korea) to supply 250,000 tons per year of LNG in the next 20 years.

The Gorgon gas processing complex, which is strategically located with easy access to the Asia Pacific region, is expected to gain global significance. With the demand for natural gas in the Asia Pacific region, which presently consumes around 80 million tons per year, expected to double by 2015, increasing natural gas requirement in North America and Europe will also bring in new opportunities.

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