NEW YORK - While the costs of the massive Gorgon Australian natural gas project have increased by an unspecified amount, the project remains economical, Chevron's chief executive said Thursday.
Chevron Chief Executive John Watson said the costs of the Australian project have grown from the original estimate of $43 billion Australian dollars, citing the effect of the escalation of the Australian currency and the impact of tropical cyclones that have delayed operations. Chevron has also struggled to find skilled labor amid the boom in the Australian energy and mining sector.
Mr. Watson declined to specify how much the project's costs have grown.
"The project remains very economic," Mr. Watson told reporters here following a morning appearance at the Council on Foreign Relations that touched on a variety of issues.
A newspaper report in Australia recently said the cost of the massive project swelled by A$20 billion Australian to more than A$60 billion ($62.8 billion) due to the strength of the Australian dollar and construction delays. Chevron has said it will wait a few months before updating it's A$43 billion estimate.
Addressing other topics, Mr. Watson reiterated that Chevron would continue to fight a $19 billion ruling against the company in Ecuador relating to pollution in the country. Mr. Watson said it was essential to fight the ruling to guard the company against other "frivolous" lawsuits that might be encouraged by a settlement.
"We do have to fight it," Mr. Watson told the event. "We suck it up."
Mr. Watson said the shale gas boom in the U.S. presents the country with a "once in a generation opportunity" to boost its energy security and improve its balance of payments. But he added that it was unrealistic to think the U.S. could insulate itself from the world oil market even if it becomes self-sufficient in terms of oil use.
Like other oil companies, Chevron has touted its work in renewable energy even as it has continued to spend the lion's share of its budget on conventional petroleum. Mr. Watson defended the company's record from criticism that it isn't doing enough about climate change.
"We have to make sure we stay a rich country," Mr. Watson said. "The priority has to be on developing our economy and not imposing additional costs on our country."
Mr. Watson said he "isn't holding [his] breath" over the prospects that the new Mexican administration will open up the sector to foreign investment. He cited the country's long history of keeping oil a state-controlled sector.
"It's a very emotional issue" for Mexico, he said.
Copyright (c) 2012 Dow Jones & Company, Inc.
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