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Chevron starts LNG output at Australia's Wheatstone, first cargo expected in weeks

MELBOURNE/SINGAPORE (Reuters) — Chevron Corp said on Monday it has started producing LNG at its Wheatstone project in Australia, slightly later than expected, and plans to ship its first cargo soon.

Chevron Wheatstone LNG Resized
Photo courtesy of Chevron.

The LNG market will be focused on how smoothly Wheatstone progresses following the troubled start-up at Chevron's bigger Gorgon LNG project. Both projects are fed from natural gas fields offshore the state of Western Australia.

"The first cargo is on track to be shipped in the coming weeks," Chevron Corp said in a statement. It had originally hoped to start exporting from Wheatstone in the middle of 2017.

Wheatstone is the sixth out of eight projects in a $200 B Australian LNG construction boom that is now in its final stretch. The two remaining ones are Royal Dutch Shell's Prelude floating LNG project and Ichthys, led by Japan's Inpex.

This massive expansion, which has suffered numerous delays, has propelled Australia past Malaysia to become the world's second-biggest LNG exporter. Once all the mega-projects are completed, Australia will challenge Qatar for the top spot.

WHEATSTONE TO WEIGH ON LNG PRICES

Wheatstone, co-owned by Australia's Woodside Petroleum , Kuwait Foreign Exploration Co and Japan's Kyushu Electric Power Co, has two gas liquefaction units, which at full capacity will supply 8.9 MMmt of LNG a year to customers in Asia.

The company expects the second unit to start producing six to eight months after the first.

Woodside has been closely involved in Wheatstone, looking to ensure smooth development, as the company expects the project to be the largest contributor to its planned 15% production growth over the next three years.

"Wheatstone is a world-class asset and the safe start-up of the facility was one of our priorities for 2017, supporting our near-term growth strategy," Woodside Chief Executive Peter Coleman said.

Wheatstone exports could stall rising spot LNG prices, which have surged 55% since March to $8.50/MMBtu on strong demand and the delayed ramp-up of many of the Australian LNG export facilities.

"It (Wheatstone) comes at just the right time ahead of winter...Together with Wheatstone, several new LNG trains such as Yamal LNG, Cove Point and Train 4 from Sabine Pass will ramp up or start up production by year-end," said Nicholas Browne, head of Asia gas and power research at Wood Mackenzie in Singapore.

"This will sow the seeds for strong production through winter 2017–2018, pushing the market into increasing over-capacity as we move into the summer of 2018. We therefore expect to see prices dip below $6/MMBtu once this winter is over," said Browne.

Reporting by Sonali Paul in MELBOURNE and Henning Gloystein in SINGAPORE; Editing by Paul Tait and Christian Schmollinger


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FEATURED COLUMNS

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According to GIIGNL’s 2018 Annual Report, global LNG trade expanded by 3.5 Bft3d in 2018, to 38.2 Bft3d—a record 10% increase.
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Increasing public investment in gas-fired power plants in Africa, the continuing recovery in global oil prices and persistent insecurity in key producer markets, such as Nigeria, are likely to impact gas transmission pipeline projects on the continent, even as more international companies express interest in the region’s stranded gas resources.


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