Gorgon licences bring $60b project closer

MELBOURNE - Australia awarded Chevron and its partners gas production licences for the A$50 billion ($60 billion) Gorgon venture, bringing the nation's biggest resources project closer to an investment decision.

Australia has awarded five licences to Chevron, Exxon Mobil and Royal Dutch Shell, Prime Minister Kevin Rudd said yesterday. The companies won environmental approval last week to build a liquefied natural gas processing plant on Barrow Island, a nature reserve off the northwest coast.

LNG exports from Gorgon may be valued at A$300 billion over 20 years, the Government said yesterday. Exxon said last week the partners may decide within the next month whether to build the venture, which has contracts to supply the fuel to China, India and Japan. The companies still needed development approval from Western Australia's state government, said Chevron spokeswoman Nicole Hodgson.

The licenses awarded cover the Gorgon and Io-Jansz gas fields. Australia also renewed the partners' leases over seven fields in the Greater Gorgon area to maintain production and extend the life of the project, Rudd said. The Government placed conditions on some of these rights to ensure their timely development.

Carbon dioxide generated as the gas is turned into liquid form on Barrow Island will be captured and stored underground, reducing Gorgon's greenhouse gas emissions by 40 per cent. The governments have agreed to jointly pay any long-term liability arising from the storage, Rudd said.

Environmentalists have criticised the decision to approve the project and the carbon-capture plan, and some campaigners want the processing plant moved to the mainland.

The track record of carbon capture ventures around the world is poor and inadequate conditions imposed on Gorgon may result in all the project's carbon emissions venting into the atmosphere, Australian Greens Senator Rachel Siewert said yesterday.

"That could mean we're looking at this project emitting the equivalent emissions of eight new coal-fired power stations," Siewert said.

Rudd said Australia would set up a task force to help secure as many as 70,000 skilled workers to build and operate resource sector projects during the next decade. Gorgon will create about 6000 jobs during construction.

Gorgon would generate about A$40 billion in revenue that will fund schools, hospitals, roads and infrastructure for the state and the nation for decades, Rudd said. The project has enough gas to underpin a 30-year operation. Gorgon would produce the fuel for at least 60 years, Exxon Mobil Australia chairman John Dashwood said.

Gorgon will have the capacity to produce 15 million metric tons of LNG a year at Barrow Island, Chevron says. Three production plants will be built on the island, 50km off the West Australian coast.

- BLOOMBERG