Apache, KUFPEC Join Chevron's Wheatstone LNG Project

Chevron has signed an agreement with Apache Julimar Pty Ltd, a subsidiary of the Apache Corporation, and KUFPEC Australia (Julimar) Pty Ltd, a subsidiary of the Kuwait Foreign Petroleum Exploration Company k.s.c., to bring them into Chevron's Wheatstone liquefied natural gas (LNG) project as natural gas suppliers and 25 percent equity partners in the project facilities.

Under the agreement, Apache and KUFPEC will provide natural gas from their Julimar and Brunello fields, located in northwestern Australia, to supply 25 percent of the inlet gas to trains 1 and 2 of the Wheatstone project. Apache will assume a 16.25 percent equity interest and KUFPEC an 8.75 percent equity interest in the project. Chevron will remain the project operator.

"We are pleased to have Apache and KUFPEC as foundation partners in the project. Bringing in Apache and KUFPEC is intended to help us grow a Wheatstone LNG hub to process both Chevron and third-party gas. We anticipate that both Chevron equity gas and third-party gas will be available for further expansion trains now that the foundation project is in place," said Jim Blackwell, president, Chevron Asia Pacific.

John Gass, president, Chevron Global Gas, added, "Creating the Wheatstone project as an LNG hub will continue to help unlock natural gas resources in the Carnarvon Basin and establish a new source of LNG from Australia for customers in the Asia-Pacific market."

"We are pleased to have an opportunity to be a foundation partner with Chevron in the first LNG hub in Western Australia," said G. Steven Farris, Apache's chairman and chief executive officer. "Wheatstone is a potential game-changer for Apache, unlocking 2.1 trillion cubic feet of gas reserves at two of Apache's largest discoveries and generating steady production for 15 years at prices pegged to world oil markets."

In July 2009, Chevron announced the award of a major front-end engineering and design contract for the first phase of the project's development. Wheatstone's first phase will consist of two LNG processing trains with a combined capacity of approximately 8.6 million tons per year. The facility will be located at Ashburton North on the mainland of Western Australia. A final investment decision on the first phase of the project is slated for 2011, after the FEED is completed. Apache's net share of FEED costs is expected to be $110 million.

Apache's net capital for the project, before any sell-down, currently is estimated to be $1.2 billion for upstream development of the Permit WA-356-P fields and $2.9 billion for Wheatstone facilities including the LNG plant. The funding will be disbursed over several years as the project is developed. Apache projects net sales will be approximately 190 million cubic feet of gas and 5,100 barrels of condensate per day with a 15-year production plateau.

Discovered in 2004, Chevron's Wheatstone field is located in the WA-253-P and WA-17-R permit areas in water depths of around 650 feet (200 meters). The adjacent Iago field was discovered in 2000 and spans two retention permits: WA-17-R, which is wholly owned by Chevron Australia, and WA-16-R, in which Chevron has a majority interest.