Chevron pauses to fix cracks in gas line at Gorgon project

Chevron has delayed bringing an LNG processing train back online at its Gorgon project in Western Australia until the second half of this month.

Chevron has delayed bringing an LNG processing train back online at its $US54bn ($77bn) Gorgon project in Western Australia until the second half of this month after major cracks were discovered during maintenance in July.

The US energy major, which also operates WA’s Wheatstone LNG plant, and is selling its stake in the North West Shelf gas facility, had originally planned to resume production at Train 2 of the three-train plant in October.

That has now been pushed out to the latter half of November, with inspections to follow on the first and third production plants, known as trains, over the next few months.

“We’ve started the recommissioning process from the turnaround and the extended turnaround,” Chevron chief financial officer Pierre Breber said on an earnings call late on Friday.

“The next steps are to dry out the systems and then we’ll begin cool-down.

“We expect this to take several weeks, which will put first LNG production in the second half of November.”

Cracks up to 1m long and 30mm deep on between eight and 11 pressurised propane “kettles”, or heat exchangers, on Train 2 of Gorgon were discovered during scheduled maintenance.

Chevron had previously flagged there may be more problems with cracks, saying the company could be forced to reinspect the first of three production trains in light of cracking found at the facility.

It confirmed inspections would now take place on Trains 1 and 3, meaning further production outages will hit its operations.

“In terms of Train 1 we expect that to be taking down soon after Train 2 is back online. And then we would inspect Train 1 and depending on whether repairs are required or not that will determine how long Train 1 is down. And then sequentially, then we would look to Train 3 after that one,” Mr Breber said.

WA’s Department of Mines, Industry Regulation and Safety said on August 21 that Chevron had agreed to shut down Train 1 for inspection in early October and Train 3 in ­January.

The Gorgon processing plant houses three LNG trains with a combined capacity of 15.6 million tonnes. There have been fears the entire processing facility could face an extended shutdown and loss of production if the problems found in Train 2 are replicated in the other facilities.

Gorgon is 47 per cent-owned by Chevron, the operator, while fellow oil super majors ­ExxonMobil and Royal Dutch Shell each have a 25 per cent stake.

Chevron also hinted the sale of its NW Shelf stake may suit an infrastructure-style investor as the facility moves to a new tolling structure reliant on third party resources.

“The most significant ownership interest that we’ve talked about is selling our interest in North West Shelf and that’s the commercial matter and we just won’t comment on, but I guess I would just say, we’re in a different place than many of our competitors,” Mr Breber said.

“If you think of North West Shelf, it’s more almost like an infrastructure investment as the resource behind the plant comes down and it becomes more of a tolling facility going forward.”

The imminent move to infrastructure-style returns under the tolling mechanism has sparked a shake-up in North West Shelf ownership, with US giant Chevron putting its one-sixth stake up for sale and BHP to consider offloading its share once the tolling model has been established.

Woodside is seen as the most likely buyer of Chevron’s stake, with a sales flyer now out in the market in the expectation a deal may be concluded in early to mid 2021.

The plant, located 1260km north of Perth, includes five LNG export processing trains and two domestic gas facilities. Woodside runs the facility in a joint venture with BHP, BP, Chevron, Shell and Mitsubishi with Mitsui.