Brian Robins, 31 January 2016

After missing its planned 2015 start-up, Chevron Corp said it expects to commence first production of liquefied natural gas (LNG) at the giant Gorgon project off Western Australia, in the next few weeks, with the initial export shipments to commence by the end of the March quarter.

Additionally, first shipments from the Wheatstone project, which is also off western Australia, are expected by mid-2017.

Initial shipments from the $US54 billion ($76 billion) Gorgon project had been expected by the end of 2015, although a series of delays had pushed that back into the new year.

Addressing analysts at the end of last week with the release of the groups last quarter results, Chevron said commissioning of the first train is underway, with the completion to result in a fall in capital spending as it continues to cut costs amid the slump in the crude oil price.

“Commissioning from train 1 is in the final stages with key process units starting up, a cooldown​ cargo delivered and system cooling under way,” the chairman and chief executive, John Watson, told analysts.

“The first LNG production is expected within the next few weeks with first cargo anticipated soon after that. We’ll be ramping up train 1 in the months ahead.

“On trains 2 and 3, all modules have been delivered to site and construction is progressing. Lessons learned from train 1 are being applied and key milestones are being achieved on schedule, with startups expected at approximately six-month intervals after train 1.”

The other large local project the group is constructing, Wheatstone will see export shipments commence in mid-2017.

“Hookup and commissioning of the offshore platform is progressing,” Mr Watson told the analysts of th progress with Wheatstone. “The trunkline is ready for service, and final tie-in work is ongoing.

“Six of nine wells are drilled and completed offering sufficient well capacity for the first train. At the plant site, the operations centre and LNG loading jetty are complete, and tank hydro testing is ongoing.”

The group is seeking to sell 85 per cent of its share of the gas from the project under long term contract, and it expects to exceed 80 per cent on present indications, he said, although volumes are available for sale during the initial ‘ramp-up’ phase, as production is rising towards planned maximum levels.

But thanks to the low oil price, the LNG market is “lousy”, he told the analysts.

“When you look at spot cargos and prices, and I expect, as an industry, we’re going to go through a challenging period for any volumes that will be sold spot into the marketplace.”

Along with the rest of the oil and gas industry, Chevron is aggressively cutting costs, warning that it expects to see its credit rating cut due to the tougher stance being adopted by credit ratings agencies. It has also dumped unwanted assets, including its stake in Caltex Australia, its stake in NZ Refining along with its network of service stations there.

“If a downgrade does occur, and I think they’re moving in that direction, but if that were to occur, we would not be the only one that that would happen to,” the group’s chief financial officer, Patricia Yarrington​ told the analysts.

Acquisitions are also on the radar, with Mr Watson saying the group is “mindful of the opportunities that are out there”.

“There are opportunities that could present themselves in the current market. So we’ll be mindful of that,” he said.

Extracted in full from the Sydney Morning Herald.