Chevron Corp.: Natural Gas Projects Ramp Up

Jan. 18, 2010
Company strikes long-term deals for Australian project; lower fourth-quarter earnings expected

Chevron Corp. made several moves in the third quarter that build upon its plans to grow its liquefied natural gas (LNG) business.

Most recently, Chevron signed a 15-year agreement to supply Japan's Nippon Oil Corp. with 300,000 metric tons of LNG from its Gorgon natural gas project in Australia.

Construction on the US$39 billion Gorgon project began in December.Chevron operates the project and owns an approximate 50% interest in it, while ExxonMobil and Shell are the other major stakeholders. The site is located between 80 and 125 miles off the coast of western Australia. It contains about 40 trillion cubic feet of LNG, enough to power a city of 1 million people for 800 years, according to Chevron.

The initial project development will include a three-train, 15 million-metric-tons-per-year LNG facility and a domestic gas plant.

In December, Chevron signed a 25-year agreement with Japan-based Chubu Electric Power to supply the company with 1.44 million metric tons per year of LNG from the Gorgon project. As part of the agreement, Chubu Electric plans to purchase a 0.417% stake in the Gorgon project.

The agreement with Chubu Electric followed the signings of three long-term agreements with Osaka Gas, Tokyo Gas and GS Caltex to provide LNG from the Gorgon project.

Chevron Corp.
At A Glance

Chevron Corp.
San Ramon, Calif.
Primary Industry: Petroleum & Coal Products
Number of Employees: 65,000
2008 In Review
Revenue: $267.6 billion
Profit Margin: 8.94%
Sales Turnover: 1.66
Inventory Turnover: 28.18
Revenue Growth: 23.47%
Return On Assets: 16.08%
Return On Equity: 31.04%
"The foundation customers in Gorgon are leading energy companies in the world's largest LNG markets," said John Gass, president of Chevron Global Gas, when the Chubu Electric deal was announced on Dec. 16. "Our agreements position Chevron to deliver supplies to meet long-term demand in the growing Asia-Pacific region."

Nearly a week earlier, the company said it plans to spend an estimated $17.3 billion in 2010 for exploration, production and natural-gas related projects, including the Gorgon development. Other projects include development of oil and gas fields in the U.S. Gulf of Mexico, Brazil, Nigeria, Angola, Thailand, China and Canada.

As for near-term growth, Chevron projects fourth-quarter earnings will be lower than they were in the third quarter due to lower refining margins. The company said worldwide refining margins for the fourth quarter dropped to the lowest levels of the year.

During the first two months of the fourth quarter, U.S. refinery crude-input volumes were down by 50,000 barrels per day because of maintenance at its El Segundo refinery in California.

The company will discuss its fourth-quarter earnings on Jan. 29.

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