Regional LNG: Gorgon inches toward U.S. gas agreement

The U.S. west coast is shaping up as the next likely buyer of gas from Australia's A$11 billion ($8.3 billion) Gorgon project, which needs to sell another 2 million tonnes of gas a year before mid-2005 to proceed, Reuters reported Friday.

"We are continuing to make good progress in the U.S. and we are probably further advanced there than anywhere else," Peter Glass, Gorgon Australia LNG vice president, told Reuters on Friday.

The ChevronTexaco -led project off the coast of northwest Australia has preliminary agreements in place to supply up to 8 million tonnes per year and needs to sell another 2 million tpy before a final investment decision (FID) can be made in mid-2005.

The preliminary deals have been signed with China and the U.S. west coast.

Asked when the next agreement would be signed, Glass said: "Probably in the New Year".

Gorgon, which has proven reserves of 12.9 trillion cubic feet (tcf), has been focusing its marketing efforts on the U.S., China, Japan and Korea. One tcf of gas can produce around 20 million tonnes of LNG.

But it was eliminated last month from a tender to supply Korea Gas Corp. , which was seeking 5.3 million tpy to replace a long term contract with Indonesia due to expire in 2007 and to meet LNG demand starting from 2008.

Gorgon, aiming to deliver its first gas from late 2008, won a massive fillip last year with a A$30 billion agreement to supply 80 million-100 million tonnes of LNG to China over 25 years.

Glass said the terms of the supply deal with China National Offshore Oil Corp., parent of China's biggest offshore oil and gas producer, CNOOC Ltd. , was on track to be finalised by the end of the year.

ChevronTexaco Corp. has a 57.1 percent interest in the Gorgon project, while Shell owns 28.6 percent and ExxonMobil Corp 14.3 percent.(*)