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Gorgon Gas Project

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Overview Developments, Future developments Stakeholders, Agreements, Grants Finance Government Acts, Policies, Attitudes CO2 Injection Technology Environment, Health & Safety

Gorgon Gas Project
It is one of the world's largest natural gas projects and the largest single resource project in Australia's history. Includes the construction of a 15 million tonne per annum LNG plant on Barrow Island. LNG tanks transport to international markets while domestic gas piped to WA mainland Approval in 2007, expected to start up in 2014.

1973 West Tryal Rocks field discovered 1976 Spar field discovered 1984 Gorgon field discovered 1994 Chrysaor field discovered 1996 Dionysus field discovered

1998 Reserves certified and gorgon JVPs start front end engineering and design (FEED) work Asian economic crisis delays project 1999 Io. Jansz. and Geryon fields discovered .

2001 Chevron promotes Barrow island plant location 2003 Environmental. Social & Economic assessment completed Approved 300 hectares (1. Io & Jansz Framework agreed & Signed .3% of islands uncleared land) for development (barrow island act 2003) 2005 Front End Engineering and Design (FEED) commences for 2x5mt/a LNG trains with supply from gorgon.

3x5mt/a trains scheme approved by JVPs 2008 Environmental review starts on revised expanded scope .2006 Chandon & Clio fields discovered 2007 Environmental approvals for 2x5mt/a trains approved.

2009 Revised & expanded scope approved for 3x5mt/a trains Gorgon downstream FEED completed Arrival of ENSC7500 Interest for domestic gas State & federal government environmental approvals completed Production licenses offered Gorgon Project final investment decision by JVPs .

Future Developments .

• Gorgon: Drilling using the Atwood Osprey Gorgon • 8 Subsea Wells • 3 Manifolds • 3 PTS • 84km Pipelines and Umbilical Jansz • 10 Subsea Wells • 2 Manifold/PTS Structure • 135km of Pipelines and Umbilical • Jansz: Drilling using the Deepwater Frontier .


Current Standing • On schedule for first gas in 2014 • Fabrication of PAUs/PARs and modules underway (ahead of schedule) • Dredging and Horizontal Directional Drilling programs making significant progress • Barrow Island and near shore workforce now in excess of 1.400 • Native Title Agreements for domestic gas pipeline signed • Trees being assembled in Aberdeen • Module estimated at 74 ton • 20 trees being manufactured to support the project .

Stakeholders Osaka 1% Tokyo 1% Chubu 1%       Chevron Australia (47.417%) Mobil 25% Chevron 47% Shell 25% .25%) Tokyo Gas (1%) Chubu Electric Power (0.33% ) Project Operator Shell Development Australia (25%) Mobil Australia Resources (25%) Osaka Gas (1.

The Japanese based stakeholders also created Sales and Purchase Agreements with Chevron to secure delivery of LNG to Japan.375Mtpa for 25 years Toyko Gas 1.7.Sales and Purchase Agreements for LNG Japan is the worlds largest importer of LNG.05 Mtpa to Chevron. South Korea 0.1Mtpa for 25 years Chubu Electric 1.44Mtpa for 25 years remaining 32% osaka gas 20% Caltex. Osaka Gas 1. Japan 0.3 Mtpa for 15 years toyko gas 16% nippon 4% kyushu 4% caltex 4% chubu 20% . Japan 0.3 Mtpa for 20 years Nippon Oil.25Mtpa for 20 years Kyushu Electric. 15 Mtpa of LNG predicted for the Gorgon Project.

25 Mtpa over 20 years petronet india 40% Petronet India 1.5 Mtpa over 20 years petrochina 60% Shell.75 Mtpa to Mobil PetroChina 2.3.portfolio selling .Sales and Purchase Agreements for LNG 15 Mtpa of LNG predicted for the Gorgon Project.

Domestic Gas Agreements  Verve and Synergy have both entered into contracts for a combined 125 terajoules per day for 20 years term starting in 2015.  This is equivalent to 0.8 Mtpa of LNG .

Suggested reasons to contribute: • The government will make $40 billion off the lifetime of the project • Looks good to support environmental causes in the public eye . The government has contributed $60 million towards the project.Government Grants The Carbon Dioxide Injection Project (discussed later) is an $850 million project aimed at minimising greenhouse gases.

Overall Gorgon Risk The Gorgon project had to evaluate upstream risks in LNG production. midstream risks in shipping. and downstream risks in LNG off-take agreements .

Overall Gorgon Benefits The Gorgon fields are jointly developed by Australian subsidiaries of three international energy companies – Chevron. . This combination of strong credits adds a strong layer of comfort to the syndicate of lenders. Each sponsor has a strong credit rating and is responsible for financing its share of the project costs. Royal Dutch Shell and Exxon Mobil.

KBR. • Cost overrun risk mitigated by Operator having substantial stake in project • Strong experience of Engineering. Procurement.Upstream Risks and Benefits • Plant Construction Risk • Each participant is responsible for financing its respective equity share of project costs. Construction contractors (JGC. Clough & Hatch) • Plant Operational Risk • Excellent track record from Chevron • Gas Reserves Risk • Greater Gorgon Fields have reserves of 40 tcf (trillion cubic feet) .

legal and political environment in Australia • Strategic importance to monetize Western Australia’s gas resources . • Political and Environmental Risk • Stable fiscal.Upstream Cont.

Midstream Risk • • • • • Vessel Construction Risk Vessel Operational Risk Charterer Risk Sponsor Risk Vessel Debt-Related Risk .

 .  . cost overruns to be covered by the sponsors.Strong track record in LNG shipbuilding for Hudong.Mitsui OSK Lines and China Shipping Development are large reputable and financially solid ship owners.  .Project Development Agreement to enhance shipbuilding process and vessel quality.  .CEXIM (Export Import Bank of China) provided long term fixed rate loan to help mitigate interest rate risk.Vessel supervision to be carried out by both Mitsui OSK Lines and ExxonMobil  .Midstream Benefits  .Liquidated damages in case of construction delays. .

DownStream Risks:  Off-take Risk: which is an agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer's future production. . Benefits:  Strong. robust off-taker (PetroChina & Petronet India)  Global increase in demand for LNG.

.  A massive USD $869 million debt was raised to help finance the cost of 4 massive LNG tanker ships constructed by Hudong-Zhonghua Shipbuilding.Investment Analysis  The budget for the total Gorgon project is USD $37 billion.  The project is expected to spend about $20 billion on goods and services alone during the construction period.

•Chevron is still very confident that production will still be commencing around the stated schedule in late 2014.Budget Increase for Gorgon •Chevron has admitted that the $37 billion dollar budget will increase. • -Increasing labour cost • Productivity issues • The high Australian dollar -Half of Gorgon’s cost are in Australian dollars. . •Chevron is currently performing an assessment that will help them understand the movements in cost. •Oil prices are 60% higher than at the time of the projects sanction.

 Australia’s gas export are predicted to quadruple over the next decade  About $33 billion will be spent on local goods and services.  Will create about 10000 direct and indirect jobs at peak construction.GDP Increase  Gorgon will increase Australia’s GDP by $63 billion dollars. .

directly and indirectly . • A partner.Government Attitudes • An integral role in making the project viable.

Government Policies  Under current arrangements. even though the processing facilities will be on state land.Norman Moore 3/24/2013 . the commonwealth will receive all royalties from the batch of looming petroleum projects in WA because the gas sits in federal waters.  ‘it was only fair that WA should receive a share of oil and gas royalties’ -.

Minerals Resource Rent Tax The expanded PRRT (Petroleum Resource Rent Tax) Increased taxation based on their profits (super-profits tax). not on the quantity of resource extracted • The power of government to introduce new taxes is essentially limited to what people are prepared to pay.Tax Issues • • • • PRRT (used to exclude the North West Shelf and East Timor) The new tax . .

6million tonnes/y) • Approximately 120 million tonnes of CO2 will be safely injected underground during the life of the Gorgon Project (6x more than any project in the world). positioning Australia as a world-leader in CO2 injection technology.CO2 Injection • Gorgon field contains about 14-16% CO2 which is removed during gas processing operations and is usually emitted via atmospheric venting • The joint venture has invested about $2billion in the design and construction of the worlds biggest commercial CO2 injection facility and should reduce the projects emissions by 40% (3. .

• The movement of the injected CO2 will be monitored using time-lapse seismic data and surveillance wells to detect the arrival time and the volume of CO2 at the well . and then compressed and injected into the Dupuy formation underneath Barrow Island • Once injected.• The CO2 extracted from the reservoirs will be extracted as per normal gas processing. the CO2 will dissolve into the sandstone and become permanently stored in the underground reservoir Dupuy • Once injection has started. a reservoir surveillance program will monitor movement of the injected CO2 and observe the effects on the reservoir.

which represents the highest level of protection afforded under State legislation .The Environment Barrow Island was set aside as a nature reserve in 1910 in recognition of its outstanding flora and fauna values It is currently reserved as a Class ‘A’ Nature Reserve for the purpose of ‘Conservation of Flora and Fauna’.

Subsea gathering systems and subsea pipelines will be installed to deliver feed gas from the Gorgon gas fields to the west coast of Barrow Island The feed gas pipeline system will be buried as it traverses from the west coast to the east coast of the Island where the system will tie in to the Gas Treatment Plant located at Town Point .

How to protect Barrow Island and surrounding waters during production and operation? 1) Devise a plan 2) Seek Approval 3) Adhere to the plan .

0 is conducted in a manner that protects environmental values and reduces impacts to the environment as far as practicable” .“This Plan has been prepared to ensure that the installation and pre-commissioning of the DomGas pipeline as described in Section 3.



8.Environmental Outcomes Risk is evaluated and defined on a scale from 1-10 (7.9.10) deemed acceptable .




Implementation The Inherent Risk is assessed and then management and mitigation measures are taken to reduce the risk to acceptable levels (Residual Risk) .

injury prevention programs. Environment and Safety is at the forefront of all development plans The company provides an all encompassing medical service for injury treatment and management. drug and alcohol testing and health education .Health & Safety “For us. it's not about statistics – it's about keeping people safe” Chevron – as the operator of Gorgon – is committed to making sure Health.

Investing in the Health of the Gorgon Workforce The health of Chevron's construction and operational workforce is looked after by Medibank Health Solutions as part of a $20 million five-year contract to deliver medical personnel and services on Barrow and Thevenard islands .

‘Health & Safety’ is also covered in the risk management plan . http://theconversation.wa.aspx http://www.chevronaustralia.chevronaustralia.theaustralian.aspx#7610 http://www.aspx .au/national-affairs/new-tax-wont-hit-us-say-gas-and-oilgiants/story-fn59niix-1226457776822 “Gorgon Gas Development and Jansz Feed Gas Pipeline”.com/ourbusinesses/gorgon/ jection.aspx 2012 http://www.aspx           http://www.chevronaustralia. 2012 http://www.aspx Chevron Articles: subsea operations            “Gorgon Gas Development and Jansz Feed Gas Pipeline”.au/business/wa-push-to-keep-gas-and-oil-royalties/storye6frg8zx-1225836721690 http://www.aspx jection.aspx http://www. expansion www. carbon dioxide seismic baseline survey .com/ourbusinesses/gorgon/healthandsafety.aspx

Questions? .