Chevron Executive: Wheatstone LNG Deal With Kogas Expected In '10
December 07, 2009: 08:02 PM ET
HOUSTON -(Dow Jones)- Chevron Corp. (CVX) expects to announce in 2010 an agreement with state-run Korea Gas Corp. (036460.SE), or Kogas, to deliver liquefied natural gas from its Wheatstone Project offshore Australia, a top executive of the company said Monday.
"We are certainly in discussions with Kogas about LNG supply from Wheatstone," said John Gass, Chevron's president for global gas, in an interview. "I expect there will be an announcement sometime in the new year."
The San Ramon, Calif.-based company said earlier this year it was in talks with Kogas to sell LNG from Wheatstone. Both companies already signed a preliminary agreement for the delivery of LNG from Chevron's Gorgon project in Western Australia.
A new supply contract with Kogas from the Wheatstone project would add to a string of energy-supply deals sealed by international oil companies with East Asian buyers. On Saturday, Chevron said it has a preliminary agreement to sell 4.1 million metric tons of LNG for as many as 20 years from Wheatstone to Japan's Tokyo Electric Power Co. (9501.TO), also known as Tepco.
Gass said the recent deal with Tepco and the negotiations with Kogas add credibility to Wheatstone and help keep on the track the development of the project, which he confirmed will see a final investment decision in 2011.
Oil companies such as Chevron, Exxon Mobil Corp. (XOM) and Royal Dutch Shell PLC (RDSA) are betting big on LNG to capitalize on what they expect will be a surge in demand for cleaner-burning fuels. Australia's political stability, substantial gas reserves and proximity to fast-growing Asian economies make it an attractive place in which to invest.
Gass also said Chevron remains committed to all its LNG projects in Australia, including its investment in the Browse Basin, where it's partners with BHP Billiton Ltd. (BHP), BP PLC (BP, BP.LN) and Shell. Gass said the company is still "carefully reviewing" a letter sent by the Western Australia state government in which it is asked to speed up the development of the project. "We are committed to developing Browse," he said.
Investing in projects like Gorgon and Wheatstone are key to Chevron's long- term corporate strategy, as they will transform the company's gas business into a significant part of its global portfolio in the future, Gass said.
Chevron expects demand for LNG to continue to grow significantly in the next 20 to 25 years in Asia - not only in traditional markets like Japan, South Korea and Taiwan, but also in China and India, Gass said. "We are very bullish on that market," he added.
The executive said he expects LNG to continue to be priced using the Japan Crude Cocktail, which is based on the average price of crude oil imports in to Japan, as a benchmark. "That is going to continue for the foreseeable future," Gass said.
-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; isabel.ordonez@ dowjones.com
(David Winning in Sydney contributed to this article.)
(END) Dow Jones Newswires 12-07-09 2002ET
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