Chevron Reaffirms Commitment to Gorgon LNG Project

ADELAIDE Apr 16, 2007 Dow Jones Newswires

Chevron Corp. (CVX) Monday reaffirmed its commitment to the US$8.6-billion-plus Gorgon liquefied natural gas project, but said it won't rush a final investment decision until it has completed additional work to deal with cost pressures.

In December last year Chevron said it planned to hold off on a final investment decision on the 10-million-metric-ton-a-year LNG project until at least mid-2007 as it worked to deal with significant cost increases.

Chevron's Gorgon general manager, Colin Beckett, told Dow Jones Newswires that the oil major and its partners in the project, Royal Dutch Shell PLC (RDSA) and ExxonMobil Corp. (XOM), remain committed to the project.

"The partners really are behind this project ... it is a very important project to all of us," he said on the sidelines of the Australian Petroleum Production and Exploration Association conference in Adelaide.

"We have to live with this project for a very long time so we are taking our time to get it absolutely right."

Beckett said that with a project of this size it is important to work hard on the pre-planning process to minimize the risk of cost overruns in the construction phase.

"We understand Australia is by definition a high-cost environment and that was known from day one," he said. "So the challenge is, given that, how you make sure you execute with excellence and avoid cost increases on the way."

Beckett declined to comment on when a final investment decision might now be made or on the specifics of the amendments being made to the project to deal with cost pressures.

The West Australian government has given the green light to the Gorgon project, the biggest of several proposed LNG developments off the northwest coast of the state, but the environmental approval process for the project is yet to be completed.

Chevron has a 50% stake in the project, with ExxonMobil and Shell each holding 25%.

Copyright (c) 2007 Dow Jones & Company, Inc.