Asian LNG buyers gain as Kitimat, Gorgon projects make progress

Liquefied natural gas buyers in Japan and South Korea, the biggest users of the fuel, are closer to new supply sources after rival LNG ventures in Australia and Canada achieved milestones on the path to production.

Chevron Corp. and its partners yesterday won final environmental approval from the Western Australian state government for the A$50 bn ($42 bn) Gorgon project. Canada’s Kitimat LNG Inc. yesterday signed an agreement with Apache Corp. for the supply of as much as 300 mln cubic feet of gas a day to a proposed processing and export plant in British Columbia.

India’s Petronet LNG Ltd., CPC Corp. of Taiwan, Korea Gas Corp., Tokyo Electric Power Co. and China Petroleum & Chemical Corp. have signed contracts to buy about 30 mln metric tons of LNG for deliveries starting in 2014-2015, from projects in Australia, Papua New Guinea and Canada.

“Gorgon will get a final investment decision this year and Kitimat is one of the fast-track projects,” Tony Regan, an independent LNG consultant, said in Singapore. “The projects have got buyer support.”

New Delhi-based Petronet LNG signed an agreement with Exxon Mobil Corp. to buy 1.5 mln tons a year of the fuel for 20 years from Gorgon, it said yesterday.

Tokyo Gas, Chubu Electric Power Corp. and Osaka Gas Co. have agreed to purchase a combined 4.3 mln tons a year of LNG from Chevron’s share of Gorgon for 25 years, Nicole Hodgson, a Chevron spokeswoman, said by e-mail in June. Chevron’s partners in Gorgon are Exxon and Royal Dutch Shell Plc.

Project delays

Korea Gas has agreed to buy 2 mln tons a year for 20 years from Kitimat LNG, and Spain’s Gas Natural plans to purchase up to 1.6 mln tons annually for the same period, according to the company’s Web site. Kitimat plans to start production by 2013 and may export as much as 5 mln tons a year of the cleaner-burning fuel.

There may be a need for LNG in 2014-2015 because projects such as Chevron’s Wheatstone in Western Australia have been delayed, reducing potential supplies during that period, said Regan, who earlier worked for Shell’s LNG business.

Kitimat agreed with EOG Resources Inc. last month for the supply of fuel to the LNG plant, which has a planned capacity of 700 mln cubic feet a day of natural gas, Kitimat, a subsidiary of Galveston LNG, said.

Apache is also in talks with Chevron and Woodside Petroleum Ltd. for the supply of gas to proposed LNG plants at Wheatstone and Pluto in Australia, Regan said.

Western Australian Premier Colin Barnett has estimated the value of the Gorgon project at A$50 bn, while Chevron hasn’t confirmed or denied the figure. LNG is natural gas that’s chilled to liquid form for transportation by ship to destinations not connected by pipeline.