Analysis: Wheatstone Lays Foundation for Future LNG Development
Chevron's Wheatstone project is expected to play a significant role in transforming Australia into a reliable supplier of natural gas.
Drilled in July 2004, the Wheastone-1 well is about 110 mi west of Dampier in the Carnarvon Basin off Western Australia. Transocean's SEDCO 703 semisubmersible drilled the exploration well to 11,096 ft TVD in about 700 ft of water. The well encountered approximately 175 ft of net gas sands in the Jurassic Tithionian and Triassic Mungaroo AA sands within a 413-ft hydrocarbon column.
A production test on the well in retention lease WA-17-R established a flow rate of 54 MMcf/d, which rig equipment constrained.
Chevron announced in Q1 2008 plans to develop a new Australian LNG facility on the northwest coast of mainland Australia. The project will lay the foundation for commercializing Wheatstone as well as provide the resources to develop additional natural gas discoveries in the area.
Chevron is the operator of the Wheatstone field, which is estimated to hold 4.5 Tcf of natural gas. Chevron holds an approximate 75% interest in the project with Apache Corp. holding 16.25%, and KUFPEC Australia (Julimar) Pty Ltd, holding 8.75% interest.
In Q2 2008, Chevron announced a significant discovery on the Iago field, which is near Wheatstone on permit WA-16-R. Diamond Offshore's Ocean Bounty semisubmersible drilled the Iago-2 well in about 384 ft of water. The well discovered 154 ft of net pay in sands of the Triassic Mungaroo Formation, confirming a southerly extension of the Iago field into a previously untested reservoir compartment. A subsequent drill stem test over a 105 ft interval flowed at a rate of 53 MMcf/d.
The Iago resource spans two retention permits, WA-17-R, which is wholly owned by Chevron Australia, and WA-16-R, in which Shell Development (Australia) Pty Ltd. has a one-third share with Chevron holding the remainder.
The Marine 500 semisubmersible, which is now the Pride South Pacific, drilled the Iago-1 discovery well in 2000.
In February 2009, Chevron announced that its seven-well exploration and appraisal program for the Wheatstone and Iago fields was successful. Chevron estimates that the fields hold enough natural gas resources to support a two-train Wheatstone LNG and domestic gas project. The initial phase of the Wheatstone project will have the capacity to process 8.6 MTPA of LNG and will include a domestic gas plant.
Chevron awarded the front-end engineering and design (FEED) contract for the first phase of the Wheatstone natural gas development in July 2009.
Bechtel Oil, Gas & Chemicals Inc. won the contract to engineer and design the two LNG processing trains each with a capacity of 4.3 MTPA and a domestic gas plant. The facility will be supplied initially from the Wheatstone field and the Iago field.
In October 2009, Chevron signed an agreement with Apache and KUFPEC who will provide natural gas from their Julimar and Brunello fields in northwestern Australia. These fields will supply 25% of the inlet gas to Trains 1 and 2 of the Wheatstone project. Apache will assume a 16.25% equity interest and KUFPEC an 8.75% equity interest in the project. Chevron will remain the project operator.
The Julimar and Brunello fields are expected to hold about 2.1 Tcf of gas reserves, which will generate steady production for 15 years.
Chevron also signed a Heads of Agreement (HOA) with the Tokyo Electric Power Co. (TEPCO) to deliver 4.1 MTPA of LNG for up to 20 years.
In addition, two engineering and design contracts were awarded in December 2009 for upstream components of the Wheatstone LNG development. Chevron selected Intecsea Pty. Ltd. to design the gas gathering facilities and pipeline at the Wheatstone project and Technip Oceania Pty. Ltd. to design the production platform for the field.
Chevron expects to make a final investment decision on the Wheatstone project in 2011.
Also signed in December 2009, TEPCO acquired 15% of Chevron's equity share in the Wheatstone field licenses and an 11.25% interest in the Wheatstone natural gas processing.
Most recently, Chevron agreed to multiple HOAs with Kyushu Electric Power Co. Inc. for the delivery of LNG from the Gorgon and Wheatstone natural gas projects.
Under the agreements, Kyushu Electric anticipates receiving 0.3 MTPA of LNG from the Greater Gorgon project for 15 years. The company will acquire 1.83% of Chevron's equity share in the Wheatstone field licenses and a 1.37% interest in the Wheatstone natural gas processing facilities. Additionally, Kyushu Electric expects to purchase 0.7 MTPA of LNG from the Wheatstone project for up to 20 years. Including this equity participation, Kyushu Electric will take delivery of 0.8 MTPA of LNG from the Wheatstone project.
Chevron is also the operator of the Greater Gorgon project in the Carnarvon Basin, which will be tied back to onshore LNG facilities. The Gorgon project is one of the world's largest natural gas projects and is the largest single resource natural gas project in Australia's history. Construction of the Gorgon project began in the second half of 2009, with first gas planned for 2014. The initial project includes a 15 MTPA LNG facility and a domestic gas plant in northwestern Australia.
The Gorgon project consists of a three-train LNG facility with total gas resources of 40 Tcf.
The Gorgon field is about 50 mi off the northwestern coast of Western Australia in the Carnarvon Basin and on the Northwest Shelf. Greater Gorgon includes several gas fields in 722-4,265 ft of water.
The project includes discoveries made on WA-18-R, WA-267-P, and WA-268-P. The Gorgon gas field was discovered in 1981, but the project also includes the Geryon-1 and the Orthrus-1 wells, which were discovered in 1999, the Urania-1, Maenad-1 and Jansz-1 wells, which were discovered in 2000, the Io well, which was discovered in 2001, the Chandon-1 well, which was discovered in 2006, and the Achilles well, which was discovered in 2009.
The first LNG from Greater Gorgon is due in 2014, and domestic gas is planned by the end of 2015.
Through its Australian subsidiary, Chevron has been present in Australia for more than 50 years. Aside from operating the Greater Gorgon and Wheatstone projects, Chevron also operates the Barrow Island and Thevenard Island oilfields and is a foundation partner in the North West Shelf Venture and in the Browse LNG development. Chevron Australia is a significant investor in offshore northwestern Australia exploration, one of Chevron's four global focus areas for exploration.
In addition, Chevron operates a Global Technology Centre in Perth, Western Australia, that provides technology support and solutions to the company's operations throughout the Asia Pacific.