21 January 2015
Chevron has announced it has signed a gas supply deal with a South Korean industrial conglomerate.
The five-year agreement, which commences in 2017, will see the US oil and gas giant supply 4.15 million tonnes of liquefied natural gas (LNG) from its Gorgon project, on Barrow Island off Western Australia’s Pilbara coast.
In a statement, a spokesperson from Chevron said that from 2017 to 2021 more than 75 per cent of its LNG from Gorgon will be committed to customers in Asia.
Resources analyst Peter Strachan said the deal with Korean trader SK LNG Trading is part of an ongoing sales pitch by Gorgon’s joint-venture partners, which include ExxonMobil and Shell, ahead of the project producing its first gas for market next year.
“Chevron has an ongoing program of contracting for sale the LNG it’ll produce from both Gorgon and the Wheatstone project, which is under construction,” he said.
“This is part of that program, so from 2017 they’ll be selling 830,000 tonnes per annum, on average, to this Korean trader.”
Mr Strachan said the price for LNG is closely linked to the price of oil, which has tumbled in recent weeks.
“The price will be on an agreed sliding scale,” he said.
“Normally if the oil price is $100 per barrel, then the LNG price would be something in the order of $15-$15.50 per gigajoule.
“Obviously if the oil price is $50 a barrel, then the LNG price would be roughly half that.
“So the price is linked on a formula, which runs on a three-month moving average to the oil price.”
Courtesy of ABC Rural