Australia's multi-bln dollar Gorgon project to supply natural gas to China

U.S.-based Chevron Corp plans to supply Liquified Natural Gas (LNG) from its Australian Gorgon project -- the worlds most expensive -- to China after signing a preliminary agreement with ENN Energy Holdings Ltd.

U.S. listed Chevron said once the deal is finalized, its Australian subsidiary will supply up to 0.5 million metric tonnes of LNG per year over 10 years to ENN Energys subsidiary ENN LNG Trading Company Ltd once deliveries start in 2018 or the first half 2019.

Chevron executive vice president for midstream and development Mike Wirth on Tuesday said the deal represents further progress of the 54 billion U.S. dollar project with LNG buyers in China who are poised totransform the LNG landscape in that country.

"This is one more step in the development of our Australian gas business and our global LNG portfolio," Wirth said in a statement.

Chevron had previously announced a deal to supply 1 million tonnes of LNG per year to China Huadian Group's subsidary China Huadian Green Energy Co over 10 years starting in 2020.

The Gorgon project is on track to export its first cargo from the operations Barrow Island off Western Australia to Asian customers in the first quarter of 2016 after the company began to cool down its equipment.

A commissioning cargo of LNG was shipped to the plant from Indonesia aboard Chevrons Asia Excellence gas carrier in order to cool down the export system which hosts processing units, a necessary move to liquefy the natural gas from the adjacent fields.

The Gorgon Project is capable of producing 15.6 million tonnes of LNG from the development of the Gorgon field and nearby Jansz-Io field. The project is a joint venture between Chevron with 47.3 percent stake, Exxon Mobil and Royal Dutch Shell, each with 25 percent and three Japanese utilities.

ANZ senior commodity strategist Daniel Hynes told local media on Tuesday Chevron had shown demand for LNG in China remained strong despite the low oil price -- LNG price and oil are coupled -- and weakness in domestic consumption.

"Locking in customers is fairly important for these export projects," Hynes said.

"Most of the projects do have a fairly high level of volumes to start with, whereas the signing of this suggests there is still demand for LNG shipments into China despite the weak macro environment we're seeing at the moment."

LNG from the Barrow Island plant will come to market following other Australian and Pacific supplies coming online and the lifting of the export-ban in the United States from abundant shale-gas supplies.

Increasing supplies from Australia, which is on track to overtake Qatar as the world's top LNG producer in coming years, has aggravated the deterioration in Asian LNG prices, down two thirds since 2014. Endit