Chevron Starts Producing LNG at Second Wheatstone Processing Line
June 15 2018 - 12:32AM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--Chevron Corp. (CVX) has begun production
at the second of two processing units at its Wheatstone project on
Australia's northwestern coast, cementing its position as one of
the biggest suppliers of supercooled natural gas to Asia.
The milestone announced Friday draws a line on billions of
dollars invested by the U.S. energy giant in recent years on two
large liquefied natural gas projects that struggled with cost
overruns and delays. It also will mark a shift in focus to output
from construction, as demand for the cleaner-burning fuel continues
to rise.
At full capacity, Chevron estimates that Wheatstone will account
for about 6% of LNG output in the Asia-Pacific region, with a
single cargo capable of powering Japan for about nine hours.
The US$34 billion Wheatstone development on Western Australia's
Pilbara coast has an annual production capacity of 8.9 million
metric tons of LNG, plus a domestic gas plant. Chevron and its
partners approved construction of the project in late 2011, but the
first LNG shipment from the initial processing unit, or train, only
started in October 2017, months after the 2016 target.
"We've been for nearly a decade been on a robust investment
program and growing our LNG portfolio, and the anchor for that is
of course is our two Australian projects," said Stephen Green,
Chevron's president of Asia-Pacific exploration and production.
The company hasn't publicly said when it anticipates a return on
its investment in Australia, but Mr. Green said both projects were
modeled against a range of scenarios and over a long period to
clear investment hurdles set by the company. Wheatstone is expected
to produce for at least 30 years and the offshore Gorgon project,
which started production in early 2016, has an estimated
40-year-plus life.
"As we view Gorgon and Wheatstone today and the performance
we're seeing and the increases in performance improvement underway
and expected over the coming years, we are very happy we made these
investments," Mr. Green said.
Chevron for the first three months of the year logged its
strongest quarterly earnings in three and a half years, thanks in
part to an all-time quarterly production record for the company
including 69 LNG cargoes shipped from Australia, where long-term
supply deals underpin 90% of its output.
With production at the second line at Wheatstone, Chevron now
operates five such trains in Australia, including three at the
US$54 billion Gorgon project. The build-out has been part of an
about US$200 billion investment spree in the last decade by
international and local companies that has positioned the country
to overtake Qatar as the world's biggest exporter of LNG by
2019.
The surge in LNG production from Australia, the U.S. and
elsewhere has outpaced growing global demand for the fuel in recent
years, although energy consultancy Wood Mackenzie estimates a
supply shortfall to emerge early next decade.
In late-April, Mark Nelson, Chevron's vice president of
midstream, strategy and policy, said that as the market rebalances
there is an opportunity to lift capacity at Gorgon and Wheatstone
and work through bottlenecks in output. "We are focused on ramp up,
efficient operation and then building our way into leveraging the
existing infrastructure in Australia," he said.
Chevron views Wheatstone as a hub for natural gas in Western
Australia, drawing gas through 140 miles of pipelines from one of
the country's largest offshore platforms to a plant where the fuel
is chilled to minus 260 degrees Fahrenheit before it is shipped in
tankers. Chevron owns just over 64% of the project, Kuwait Foreign
Petroleum Exploration Co. and Australia's Woodside Petroleum Ltd.
each have stakes of 13% and Japan's Kyushu Electric Power Co. and
Jera Inc. control the remainder.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
June 15, 2018 00:17 ET (04:17 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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