Utilities brace for Gorgon squeeze PDF Print E-mail
Monday, 03 December 2012 08:41

State-owned electricity utilities Verve and Synergy are considering contingency plans to avert a looming gas squeeze, amid fears that Chevron's giant $43 billion Gorgon project will not be able to deliver new supplies as promised.


The US-based giant has said it will in coming days reveal updated cost and completion dates for the landmark project on Barrow Island, amid wild speculation it is up to a year late and almost $20 billion over budget.

Gorgon was originally due to start producing gas from 2014, and supply Synergy and Verve with 125 terajoules of gas a day for 20 years from a date believed to be in early 2015.

Verve uses the gas to produce power and Synergy sells the gas to its big commercial customers.

Synergy said it was monitoring the situation closely. "Synergy will ensure it has arrangements in place that enable us to meet our commitments to our gas customers," a spokeswoman said.

Verve declined to comment, however WA Energy Minister Peter Collier said it would take steps if needed. "The Government has not received any advice from the Gorgon project concerning delays to the planned delivery of domestic gas as per the contracts signed in late 2011," he said. "However the Government, through Verve and Synergy, continues to monitor domestic gas supply availability in WA and will consider contingencies should they be required."

Any delay would hit the utilities' operations hard and potentially threaten power supplies, as Verve's existing contracts with the North West Shelf are beginning to expire, leaving it with few short-term options.

Some spare gas exists in the secondary market and with smaller operators, but it may be costly to replace gas for an interim period.

Chevron has responded only in general terms to the staggering cost and time overrun speculation.

However Andy Brown, the head of upstream operations at Shell, one of Chevron's Gorgon joint venture partners, recently told investors it expected significant delays.

"When Shell took FID (final investment decision) on Gorgon in 2009, we had assumed a higher budget than the $US37 billion ($43 billion) described by Chevron, the operator, and a later start-up schedule than the first gas in 2014 that was expected by the operator," he said.

"Today, our cost estimates are higher again than our assumptions at FID, and we remain conservative on the start-up date," he added.

Credit Suisse said in September Gorgon's cost would be revised to $US47 billion, or $10 billion more than expected at FID.



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