Regional LNG: Chevron stops targeting China for Gorgon LNG, eyeing US instead

Chevron Corp. said Thursday it has stopped trying to sell liquefied natural gas from the A$11 billion-plus Gorgon project to China, looking instead to sell its remaining share to North America, Dow Jones reported.

The report cited Neil Theobald, Chevron's marketing manager for Gorgon as saying that pricing was currently very good in the US compared to China despite longer distance

"China's going to be a good market in the long term, but we're not marketing there for this phase" of Gorgon's production, he said.

Chevron's Australian unit said earlier Thursday it agreed to supply 1.5 million metric tons of LNG a year to Osaka Gas Co.from its Gorgon project off the coast of Western Australia. It said the deal is worth A$10 billion.

The contract adds to two recent deals with Japanese companies and seals 4.2 million tons of LNG a year from the five million tons Chevron has to sell.

Citing price differences, Chevron late last month scrapped a tentative A$30 billion agreement with China National Offshore Oil Corp. to become a foundation customer in the Gorgon project.

Theobald said China may become a future customer in Gorgon if it looks to expand. He said the company won't be looking to market more LNG from Gorgon "for a few years".

Theobald said he couldn't indicate when a North American gas deal will be signed for the remaining 800,000 tons of gas a year.

Chevron operates and 50% owns the Gorgon project, which is due to produce its first gas in 2010. The other owners are Exxon Mobil Corp. and Royal Dutch Shell, with 25% each.

Shell has committed to sell its stake to North American customers via Mexico and Exxon is rumored to be in talks to sell to India.(*)