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Osaka Gas Sets Accord for LNG BUSINESS ASIA By Bloomberg

Posted on: Friday, 9 December 2005, 15:00 CST

By Megumi Yamanaka and Angela Macdonald-Smith

Osaka Gas on Thursday signed an initial accord for liquefied natural gas from Chevron's Gorgon project in Australia, increasing planned Japanese purchases from the venture to 28 billion Australian dollars.

Chevron would deliver 1.5 million metric tons a year of LNG for 25 years from its share of Gorgon's output starting in 2011, Trade Minister Mark Vaile of Australia and Chevron said. Osaka Gas is also in talks to buy a stake in the project, Vaile said.

The 10 billion Australian dollar, or $7.5 billion, agreement brings the proportion of LNG sold from Chevron's share of Gorgon's output to two-thirds, increasing the project's chances of proceeding. Tokyo Gas and Chubu Electric Power have approved initial accords. Signing up these established customers is "an excellent outcome," said Neil Theobald, Chevron's president of marketing for Gorgon LNG. "We are well placed in terms of the final investment decision on the project," said Theobald. "When you reach those sorts of agreements in Japan, it's very unusual not to end up with definitive agreements."

Chevron could send the rest of its Gorgon LNG either to an import terminal it is planning in Baja California, in western Mexico, or to a U.S. Gulf Coast terminal owned by Cheniere Energy in which Chevron has reserved capacity, Theobald said. It is also talking with other potential customers, he said.

Initial engineering work on the Gorgon project is due to be completed toward mid-2006 and the partners expect to give a final investment decision in the second half of next year, he said.

Located in Western Australia, the Gorgon venture, whose partners include Royal Dutch Shell and Exxon Mobil, is set to begin output in 2010. Exxon Mobil, which owns 25 percent of Gorgon, may sell some of its share of LNG to CLP Holdings and the rest through its global gas supply network, said Fereidun Fesharaki, president of FACTS, a Hawaii-based consulting firm.

Source: International Herald Tribune

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