Gorgon is a monster all right


Goodness me that Gorgon is a cost monster. From the AFR:

Chevron appears to be bracing for another cost blowout at its $52 billion Gorgon liquefied natural gas venture in Western Australia, potentially delaying an ­expansion of the country’s biggest resources project.

Chief financial officer Pat Yarrington told investors in the United States on Friday that while productivity on the construction project on Barrow Island had increased, some areas “still need to improve”, and heavy rain in June had also taken a toll. She said Chevron was in the middle of finalising its budget for the year, “and should there be any reviews during that that suggest a material change, other than what we have said previously, we will certainly bring that to your attention”.

Any move upwards towards $60 billion capex is going to push break even towards $13mmbtu prices. There is a plan for fourth train but I can’t see how it can be forthcoming at these prices. And Chevron admitted Canada is competing for the capital required. It also said it:

expected prices in Asia to remain robust and linked to crude oil prices, despite the arrival of US LNG exports linked to the US domestic price benchmark Henry Hub.

He said Chevron, which still has 35 per cent of its Gorgon LNG volumes available for sale, was confident of being able to sell uncommitted gas on the spot market if it didn’t secure further long-term sales contracts.|

That’s a little contradictory.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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