In the world of big oil and gas industry projects, Gorgon will be a monster.
The $37 billion project to turn Indian Ocean natural gas into super-chilled liquefied natural gas for export via tankers is billions more than the estimated price of a planned pipeline project to bring natural gas from the North Slope of Alaska to the Lower 48.
The initial 20-year LNG sales contracts to just one of the project customers, Petro-China, is valued at a hefty $41 billion.
And the addition of equipment to capture and store underground thousands of tons of carbon dioxide related to the processing will make it one of the largest CO2 projects in the world.
"Outside of Qatar, nobody has ever developed an LNG project of this scale in one go," said Frank Harris, head of global LNG consulting for Wood Mackenzie.
The announcement Monday that Chevron Corp. and its partners, Royal Dutch Shell and Exxon Mobil Corp., would move ahead with the project was widely expected. The PetroChina deal last month and final approval of environmental permits by Australian regulators earlier this month cleared most of the major hurdles.
Prep work on the site will begin immediately with full construction expected to begin in February. First gas is expected in 2014.
The project will include pipelines bringing natural gas from subsea wells as far as 124 miles off the shore of Barrow Island, a gas processing plant and three liquefaction "trains" or plants, storage facilities, export terminal and carbon sequestration equipment.
Chevron has a 50 percent stake in the project, while ExxonMobil and Shell each have a 25 percent share.
Houston-based KBR is leading a joint venture that's managing construction of the project. Most of the engineering work has been moved to offices outside Houston, the company said.
Chevron said early development work on Gorgon was in Houston but it too has moved overseas to Australia, Singapore, Great Britain and other countries.
Chevron may sell some of its remaining Gorgon production to the Chinese National Offshore Oil Co., CNOOC, Harris said, which would make China the biggest purchaser of LNG from the project.
"This is further evidence of the emerging new world order in Asian LNG, where China, rather than Japan, is the kingmaker, having the ability to ensure that new projects happen," Harris said.
And while the gorgons of Greek mythology guarded the entrance to the underworld, Chevron's Gorgon stands at the entrance to a new way of doing business for major oil and gas projects, said Joseph Stanislaw, an independent adviser with Deloitte.
Barrow Island is considered environmentally sensitive, so the permitting process has been particularly tough, Stanislaw said. Including the carbon sequestration project was important because it shows the companies recognize a growing desire by the public to reduce the industry's carbon footprint.
"It establishes the new rules of the game for the oil and gas business going forward," Stanislaw said. "Natural gas will be the bridge fuel to the future, so how companies deal with CO2 emissions during projects says how long the bridge will be."
Copyright (c) 2009, Houston Chronicle. Distributed by McClatchy-Tribune Information Services.