Regional LNG: Australia approves ChevronTexaco?s Gorgon gas project

The Western Australian government said Monday that it has granted in-principle approval for the development of ChevronTexaco Corp?s A$11 billion Gorgon gas project, Dow Jones reported Monday.

Premier Geoff Gallop said the approval is for development on Barrow Island off the coast of Western Australia. Approval for ChevronTexaco to use Barrow is conditional on the Gorgon joint venture meeting "strict state and Commonwealth environmental safeguards," he added.

Gallop said that a two-stage Gorgon development has the potential to be Australia?s biggest industrial project, expected to provide annual exports worth around A$2.5 billion.

However, the venture must still navigate through lengthy environmental approvals and engineering studies before a final investment decision in mid-2005.

Liquefied natural gas exports could begin in 2008 if the Gorgon partners - operator ChevronTexaco with a 4/7th interest, Royal Dutch/Shell Group with a 2/7th stake and ExxonMobil Corp. with 1/7th - commit to a development in that timeframe.

Jay Johnson, managing director of ChevronTexaco Australia, said the government?s decision marks another milestone in the commercialization of Gorgon gas.

"We will now focus on the next phase of the development, which includes preparing our detailed environmental plans, firming up our marketing opportunities and progressing engineering and design studies," he said.

Shell Australia Chairman Tim Warren said that Shell is pleased the Western Australian government has supported the Barrow concept.

"We certainly believe that the proposal is a compelling one, which provides a unique solution for a unique situation," he said.

Gallop approved Gorgon having access to 300 hectares of Barrow, despite worries from some groups that a LNG development would disrupt the island?s rare animals and plants.

The Conservation Council of WA, a local green lobby group, has warned that it will campaign against the project.

Operator of a long-running oilfield on Barrow, ChevronTexaco estimates it will save around A$1 billion by landing Gorgon?s gas on the island, rather than the mainland.

ChevronTexaco and Shell last month conditionally agreed to buy at least 4 million metric tons of Gorgon LNG a year from 2008 to supply their proposed LNG import terminals in the U.S. and Mexico.

If the agreements translate into firm sales contracts, they could underwrite an initial 5 million-tons-a-year LNG development, ChevronTexaco believes.

However, the company also argues that Barrow Island access will enhance its prospects of selling the projects gas into Asian countries, including China. (*)