U.S. oil major Chevron plans to develop two multi-billion dollar gas projects in Asia, amid forecasts of surging gas demand and rising prices.
The second-largest U.S. oil and gas company said it has approved the $3 billion Platong Gas 2 project in Thailand and also plans to develop a new liquefied natural gas (LNG) project using gas from its wholly-owned Wheatstone discovery off northwest Australia.
Chevron, which also reaffirmed its commitment to develop the massive Gorgon LNG project off northwest Australia, said the Platong gas project was expected to increase the company's processing capacity in the Gulf of Thailand by 420 million cubic feet a day.
"The Asia Pacific region is projected to become the largest consumer of oil and gas," Jim Blackwell, president of Chevron Asia Pacific Exploration and Production, said in a statement.
"If the twentieth century was the age of oil, then the twenty-first century is poised to become the age of natural gas."
The International Energy Agency forecasts LNG demand to more than double from 2007 to 400 million tonnes a year by 2015, underpinned by powerful Asian economic growth and demand for clean burning fuels. LNG has also gained popularity because it can be transported from remote places without building vast networks of pipelines.
Chevron said the Wheatstone facility in the Pilbara region in the northwest coast of Australia would have initial capacity of at least one 5 million-tonne-per-year LNG production train with possible expansion.
Roy Krzywosinski, managing director of Chevron Australia, told Reuters that there could be front end engineering and design (FEED) decision in about a year, when it would firm up likely costs and a location.
Analysts comparing it to the similar size Woodside Petroleum 4.3 million tonnes a year Pluto LNG project estimate Wheatstone LNG could cost more than $11 billion.
Western Australia, rich in natural gas, is home to several major LNG developments.
Operating projects include Woodside's 12 million tonnes per year North West Shelf venture and ConocoPhillips Darwin LNG plant. There are five other planned LNG projects in the pipeline, including Wheatstone.
"There may be a number of proposed LNG projects off northwest Australia at the moment, but the demand for LNG is so robust that it's unlikely that there will be a situation of oversupply," said Andrew Blakely, a resource analyst at Macquarie Group in Sydney.
Discovered in 2004, Wheatstone is located 90 miles (145 km) offshore in the Carnarvon Basin in water depths of around 650 feet (198 m).
Chevron said the initial phase will tap an estimated 4.5 trillion cubic feet of natural gas resources within the two Chevron-operated permits that include Wheatstone. The facility will also provide commercial domestic gas to the local market.
Chevron's Krzywosinski said that the joint venture partners for Gorgon, which include Royal Dutch Shell and Exxon Mobil , remain committed to commercialising Gorgon.
"Wheatstone will not change our sense of urgency in moving the Gorgon project forward. Our intention is to move both projects forward without delay," Krzywosinski told Reuters.
But analysts said Chevron's decision raises question marks over the future of the Gorgon project, which some have estimated will cost as much as $20 billion.
"Gorgon is going to to be in a tough situation considering it has very high levels of carbon dioxide. Apart from that, we also have three large joint venturers involved with different aims and goals," said a Sydney-based analyst who declined to be quoted because he is not authorised to speak with the media.
Chevron, which wants to increase Gorgon's planned production to 15 million tonnes a year from 10 million tonnes, said it was still seeking environmental approvals for the expansion.