PERTH (miningweekly.com) - Energy major Chevron has initiated a cost review of its $37-billion Gorgon liquefied natural gas project, executive VP for upstream and gas, George Kirkland, said.
Speaking on a conference call, Kirkland noted that Australian labour costs were tending higher, which could impact both the construction and management services at the Gorgon project, some 130 km off the north-west coast of Western Australia.
“We are evaluating our performance to date and incorporating new information to update our expectations for the remainder of the project. Over the next few months, our assessment will help us gauge movements in cost, which we expect to provide towards the end of the year.”
To date, Chevron has awarded more than $28-billion in contracts for Gorgon, with more than half going to local contractors.
Kirkland noted that while the company was seeing increasing cost pressures, largely associated with a 20% strengthening of the Australian dollar, it was also important to note that the price of oil, which determined Gorgon’s revenue stream, was also around 60% higher than when the project was sanctioned in 2009.
“I would like to emphasise that our view of the Gorgon project has only been enhanced since the final investment decision. I remain very confident in the economics and the value created by this project,” Kirkland said.
He noted that it was with this in mind that the company had increased the capacity of the Gorgon project by 4%, upgrading the nameplate capacity of the individual trains to 5.2-million tons a year, for a total of 15.6-million tons a year.
Kirkland said that despite the challenges facing the project, Gorgon was still slated for a 2014 start-up.