Chevron begins massive Australian offshore project



Chevron Corp started its biggest-ever exploration campaign off Australia’s northwest coast, targeting finds that will underpin planned liquefied natural gas-export projects.

The drilling, costing “hundreds of millions of dollars,” will include as many as 10 exploration and appraisal wells this year, Roy Krzywosinski, managing director of Chevron’s Australian unit, said today in an interview. It aims to find more gas to supply the planned Gorgon and Wheatstone LNG projects, he said.

Australia’s northwest ranks among Chevron’s four highest- priority exploration regions worldwide, alongside the Gulf of Mexico, West Africa and the Gulf of Thailand. The Gorgon venture may cost A$50 billion ($35 billion), Western Australian Premier Colin Barnett said this month, making it the nation’s biggest resources project.

“Long-term resource security is vital to underpin these massive investments such as Gorgon and Wheatstone,” Krzywosinski said by telephone from Perth. The projects are “the top priorities” for San Ramon, California-based Chevron to drive the company’s growth in gas, he said.

Chevron said Jan. 29 it is maintaining worldwide capital spending at about $22.8 billion this year, bucking a budget- cutting trend among petroleum producers, as it seeks to halt two years of drops in output. About $2 billion will go on exploration, mostly in the four priority areas, Krzywosinski said.

Chevron Chief Executive Officer David O’Reilly said March 10 that the company and its partners in Gorgon, Exxon and Royal Dutch Shell Plc, expect to give the go-ahead in the second half to build the delayed project. It will have an initial production capacity of 15 million metric tons a year, about 76 percent of Australia’s existing LNG capacity.

The 100 percent-owned Wheatstone LNG project is running about 18 months behind Gorgon in the development line-up, and Chevron expects to start initial engineering and design work on that venture in the second half of this year. The work may last until late 2010 or early 2011, Krzywosinski said.

“We’re making a lot of progress on both of these projects,” he said. “I hope to have some good news in the second half of 2009 both on the front of Gorgon as well as Wheatstone.”

The first well in the Australian program, in the Exmouth Plateau area, is under way using the Atwood Eagle rig, he said. A second rig, the Ensco 7500, arrived in Australia this week from the Gulf of Mexico and is due to start drilling at the Exxon-operated Jansz field in early April as part of the Gorgon venture.

Any success in the drilling would add to the discoveries made at Wheatstone in 2004, Chandon and Clio in 2006 and additional gas found at the Iago field in July. Six appraisal wells drilled last year in the Wheatstone-Iago area last year doubled the resources there, Krzywosinski said.

Chevron will pay $550,000 a day for the “ultra-deepwater” Ensco 7500 rig while it is being used in Australia, up from the $365,000 daily rate payable while the rig is in transit from the U.S., Dallas-based Ensco International Inc. said in August.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. Chevron has gas resources in Australia of about 40 trillion cubic feet, Wood Mackenzie Consultants Ltd. estimated in February last year, making it the largest holder in the country.


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