The U.S.'s second largest oil company, Chevron (NYSE: CVX [FREE Stock Trend Analysis]), is planning to increase its investment in Australia by producing more liquefied natural gas (LNG) from its Gorgon and Wheatstone projects.
Reuters reported that Chevron's 52 billion AUD (50 billion USD) Gorgon site is 60 percent complete and that Chevron plans to start engineering and design work for expansion by the end of the year.
Bloomberg reported that executives from Chevron want to have about 85 percent of its share of LNG to come from the Gorgon site. Deals are already underway that link the Gorgon site to long-term contracts.
The Gorgon investment project is Australia's most costly resource project in history, with costs of the project rising 21 percent this past year due to local currency gains and higher than expected labor expenses. Chevron's Managing Director in Australia, Roy Krzywosinski, expressed concerns over high cost impacts. He commented that, “Nothing is a slam dunk…the issue of cost structure is a significant issue, especially if you have an international portfolio of competing priorities.”
James Paton of Bloomberg reported that the Gorgon project is expected to deliver its first liquified natural gas cargoes between January and March of 2015. At full capacity the plant is expected to produce 15.6 million tonnes of LNG per year.
Continue Reading Below
Chevron's smaller plant Wheatstone is worth 29 billion AUD (28 Billion USD). This plant's capacity is expected to produce about 8.9 billion tonnes per year and is scheduled to ship in 2016. Chevron closed on Friday at $125.45
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
For more market reports go to Union Bank of California