From: Reuters
Published March 10, 2008 07:25 AM

Chevron to develop two major gas projects in Asia

By Fayen Wong and Mark McSherry

SYDNEY/NEW YORK (Reuters) - U.S. oil major Chevron Corp <CVX.N> plans to develop two multi-billion dollar gas projects in Asia amid forecasts of surging gas demand and rising prices.

The second-largest U.S. oil and gas company's $3.1 billion Platong Gas 2 project in Thailand was expected to come on line by the end of March, 2011, Chevron Asia Pacific Exploration and Production president Jim Blackwell said.

"The startup of Platong gas project is scheduled for the first quarter of 2011," Blackwell told reporters.

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Chevron, which also reaffirmed its commitment to develop the Gorgon LNG project off northwest Australia, said the Platong project was expected to raise the company's processing capacity in the Gulf of Thailand by 420 million cubic feet a day.

"The project will feed a growing demand for gas in the domestic market," Blackwell said. Oil and gas demand in the Asia-Pacific region would rise by 90 percent by 2030, he said.

"The Asia-Pacific region is projected to become the largest consumer of oil and gas," Blackwell said. "If the 20th century was the age of oil, then the 21st century is poised to become the age of natural gas."

The International Energy Agency forecasts liquefied natural gas (LNG) demand will more than double from 2007 to 400 million tonnes a year by 2015, underpinned by powerful Asian economic growth and demand for clean burning fuels.

Chevron is a project operator holding almost 70 percent participating interest, with Mitsui Oil Exploration holding 27.4 percent and PTT Exploration and Production <PTTE.BK> the rest.

WHEATSTONE LNG

Chevron also expected to develop a new LNG project using gas from its wholly-owned Wheatstone discovery off northwest Australia.

The budget for developing the Wheatstone projected was "too soon to discuss" because the firm had yet to conduct a front end engineering and design (FEED) plan, Blackwell added.

"We still have to work on the plan before going into that."

The Wheatstone facility in the Pilbara region on the northwest coast of Australia would have initial capacity of at least one 5 million-tonne-per-year LNG production train with possible expansion, he said.

Roy Krzywosinski, managing director of Chevron Australia, told Reuters there could be a FEED decision in about a year, when it would firm up likely costs and a location.

LNG has also gained popularity because it can be transported from remote places without building vast networks of pipelines.

Analysts comparing it to the similar size Woodside Petroleum Ltd <WPL.AX> 4.3 million tonnes a year Pluto LNG project, estimate Wheatstone LNG could cost more than $11 billion.

Western Australia, rich in natural gas, is home to several major LNG developments.

Operating projects include Woodside's 12 million tonnes per year North West Shelf venture and ConocoPhillips <COP.N> Darwin LNG plant. There are five other planned LNG projects in the pipeline, including Wheatstone.

"There may be a number of proposed LNG projects off northwest Australia at the moment, but the demand for LNG is so robust that it's unlikely that there will be a situation of oversupply," said Andrew Blakely, a resource analyst at Macquarie Group in Sydney.

Discovered in 2004, Wheatstone is 90 miles offshore in the Carnarvon Basin in water depths of some 650 feet.

Chevron said the initial phase would tap an estimated 4.5 trillion cubic feet of natural gas within the two Chevron-operated permits that include Wheatstone. The facility will also provide commercial domestic gas to the local market.

GORGON

Chevron's Krzywosinski said that the joint venture partners for Gorgon, which include Royal Dutch Shell <RDSa.L><RDSb.L> and Exxon Mobil <XOM.N>, remained committed to commercializing it.

"Wheatstone will not change our sense of urgency in moving the Gorgon project forward. Our intention is to move both projects forward without delay," Krzywosinski told Reuters.

But analysts said Chevron's decision raised question marks about the future of the Gorgon project, which some have estimated will cost as much as $20 billion.

"Gorgon is going to be in a tough situation considering it has very high levels of carbon dioxide. Apart from that, we also have three large joint venturers involved with different aims and goals," said a Sydney-based analyst who declined to be quoted because he is not authorized to speak with the media.

Chevron, which wants to increase Gorgon's planned production to 15 million tonnes a year from 10 million tonnes, said it was still seeking environmental approvals for the expansion.

(editing by Elizabeth Fullerton)

(Additional reporting by Ploy Chitsomboon in Bangkok)

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