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Released June 05, 2013 | PERTH, AUSTRALIA
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Researched by Industrial Info Resources Australia (Perth, Australia)--Korea Gas Corporation (SEO:036460) (KOGAS) (Seoul, South Korea) has walked out on a non-binding agreement with Chevron Australia, a division of Chevron Corporation (NYSE:CVX) (San Ramon, California), for the Gorgon LNG project's long-term LNG sale. This leaves 35% of Gorgon LNG without commitment under long-term contracts.
The Gorgon project is under construction, past the halfway mark of the five-year construction time frame. Gorgon will begin exports in early 2015.
In September 2009, KOGAS signed a heads of agreement (HOA) for the supply of 1.5 million metric tons per year of liquefied natural gas from the Gorgon project to KOGAS for a period of 15 years. The deal was worth about $30 billion and was celebrated at the time of signing, as it was the first long-term business transaction between Korean giant KOGAS and an Australian supplier.
It is rumoured that KOGAS is evaluating the prospect of sourcing LNG from the U.S. at better rates than the costly Gorgon LNG from Western Australia. Chevron and KOGAS may have reached a disagreement in price.
KOGAS favours use of a U.S.-developed natural gas pricing strategy called "Henry Hub" as a benchmark, as opposed to the more common methodology of linking gas price to crude oil prices.
Chevron has not provided a reason as to why the LNG sale with KOGAS fell through. Chevron aims to achieve a sales target of 80% of LNG under long-term offtake agreements, with the remaining 20% output reserved for spot or shorter term supply contracts. Roy Krzywosinski Chevron Australia's managing director, feels confident that Chevron will reach its target.
"The closer we get to first LNG, the more valuable this volume [of 1.5 million metric tons per year] will be," said Krzywosinski. "We are not concerned. We are confident we will be able to market these incremental volumes."
Chevron Australia has confirmed Gorgon LNG Sale and Purchase Agreements in place with Osaka Gas (1.375 million metric tons per year (MT/yr) for 25 years, and 1.25% equity in the Gorgon Project), Tokyo Gas (1.1 million MT/yr for 25 years, and 1% equity in the Gorgon Project), Chubu Electric Power (1.44 million MT/yr for 25 years, and 0.42% equity in the Gorgon Project), GS Caltex of South Korea (250,000 MT/yr for 20 years), Nippon Oil Corporation (300,000 MT/yr for 15 years) and Kyushu Electric (300,000 MT/yr for up to 20 years).
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The Gorgon project is under construction, past the halfway mark of the five-year construction time frame. Gorgon will begin exports in early 2015.
In September 2009, KOGAS signed a heads of agreement (HOA) for the supply of 1.5 million metric tons per year of liquefied natural gas from the Gorgon project to KOGAS for a period of 15 years. The deal was worth about $30 billion and was celebrated at the time of signing, as it was the first long-term business transaction between Korean giant KOGAS and an Australian supplier.
It is rumoured that KOGAS is evaluating the prospect of sourcing LNG from the U.S. at better rates than the costly Gorgon LNG from Western Australia. Chevron and KOGAS may have reached a disagreement in price.
KOGAS favours use of a U.S.-developed natural gas pricing strategy called "Henry Hub" as a benchmark, as opposed to the more common methodology of linking gas price to crude oil prices.
Chevron has not provided a reason as to why the LNG sale with KOGAS fell through. Chevron aims to achieve a sales target of 80% of LNG under long-term offtake agreements, with the remaining 20% output reserved for spot or shorter term supply contracts. Roy Krzywosinski Chevron Australia's managing director, feels confident that Chevron will reach its target.
"The closer we get to first LNG, the more valuable this volume [of 1.5 million metric tons per year] will be," said Krzywosinski. "We are not concerned. We are confident we will be able to market these incremental volumes."
Chevron Australia has confirmed Gorgon LNG Sale and Purchase Agreements in place with Osaka Gas (1.375 million metric tons per year (MT/yr) for 25 years, and 1.25% equity in the Gorgon Project), Tokyo Gas (1.1 million MT/yr for 25 years, and 1% equity in the Gorgon Project), Chubu Electric Power (1.44 million MT/yr for 25 years, and 0.42% equity in the Gorgon Project), GS Caltex of South Korea (250,000 MT/yr for 20 years), Nippon Oil Corporation (300,000 MT/yr for 15 years) and Kyushu Electric (300,000 MT/yr for up to 20 years).
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
