Chevron pours cold water on Gorgon expansion

Chevron has confirmed the expansion of its Gorgon LNG project has been shelved until the total cost of firing up its three-train facility on Barrow Island is finalised.

At a conference held in the U.S on Friday, Chevron chief financial officer Pat Yarrington said the Gorgon joint venture wanted to gain a better understanding of cost structures before committing to the development of a fourth train to expand the project’s 15.6 million-tonne-a-year LNG capacity.

"We are all interested certainly in seeing this (Train 4) continue to progress," Yarrington said.

 "I think all of the JV partners are interested, though, in seeing Train 1 come up and seeing progress on 2 and 3 et cetera.”

Yarrington commented on the high costs associated with developing projects in Australia, stating it continues to place investment at risk.

"I also think it's fair to say that the cost structure in Australia is different now than it was when (a final investment decision on) Train 1 was taken (in 2009).

"The cost structure has elevated. And I think it's fair to say that that has put at risk some of Australia's global competitiveness."

The Gorgon joint venture, which includes ExxonMobil and Shell, first announced plans to source gas from a fourth LNG production train in September 2012.

It was expected the train would see the development of the Geryon and Chandon fields.

However with cost increases sky-rocketing at the site, there is speculation that another processing line could cost as much as US$20 billion to develop, The West Australian reported.

In December last year Chevron announced the Gorgon project had suffered a $9 billion budget  blowout, blaming labour costs and bad weather for the rising development costs.

The project, which was supposed to cost $US37 billion to complete, has blown out to $52 billion, with reports this could rise to as much as $US59 billion.

First LNG from the project is expected in 2015.

Earlier this year Chevron Australia's managing director Roy Krzywosinski said billions of dollars of LNG projects were in doubt as Australia struggled to keep costs down and productivity up.

Krzywosinski said the country needs a stable federal tax regime, a lift in productivity and a review of IR laws to get another wave of LNG projects.

“We remain optimistic about the Australian investment environment but it requires significant national leadership to improve our international competitiveness including fiscal stability, increased productivity and industrial relations changes that focus on Australia’s long term interests,” Krzywosinski said.

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