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Tohoku Electric signs LNG deal with Chevron

Chevron Corp has signed a preliminary agreement to sell one million tonnes of liquefied natural gas per year for 20 years to Tohoku Electric from the Wheatstone development near Onslow in Western Australia.

Roy Krzywosinski, Chevron Australia’s managing director, said that with this sale more than 80 percent of the gas from the two trains in the 8.9 million tonnes per year (mtpa) Wheatstone project had been sold to Asian customers. Wheatstone, located off the coast of Western Australia, is currently under construction, with the first gas shipments expected in 2016. Chevron plans to eventually expand the production of the $29 billion Wheatstone LNG plant to 25 mtpa.

Tohoku Electric is one of several Japanese utilities to buy supplies from Wheatstone, including Chubu Electric Power, Tokyo Electric Power Company (TEPCO) and Kyushu Electric. Chevron’s partners in the Wheatstone project are Apache Corporation, Kuwait Foreign Petroleum Exploration Company (KUFPEC), Royal Dutch Shell and Kyushu Electric.

Chevron is positioning itself to become one of the largest LNG producers in Australia. Its $37 billion Gorgon project, also off Western Australia, will produce 15 mtpa by 2014. The construction of Gorgon is now 40 percent complete, and Chevron expects to start the front end engineering and design phase for a fourth train on its current three-train project at the end of this year.

Gorgon is running two years ahead of Wheatstone, which Mr Krzywosinski said was a “sweet spot” offering significant synergies in terms of purchasing power and equipment from running the two projects as a portfolio.

Australia is expected to surpass Qatar as the top LNG exporter by the end of the decade, by which time it will have quadrupled its current production of approximately 20 mtpa.