New emissions hurdle for Gorgon LNG project
Chevron’s $US55bn Gorgon LNG project faces a fresh challenge after a ruling from WA’s environment watchdog.
Chevron’s massive $US55bn Gorgon LNG project faces a fresh challenge after Western Australia’s environment watchdog set a near-impossible target for the ambitious carbon injection project.
The US energy giant and its partners now face a possible costly bill for extra carbon offsets following Wednesday's decision by WA’s Environmental Protection Authority.
The EPA, which sparked controversy earlier this year when it proposed new guidelines that would require all major industrial projects in the state to fully offset their emissions, announced it now considered Gorgon had officially been in production since July 2016, when it received its first operations licence.
That means Chevron and its partners have little hope of meeting the requirement to capture and store at least 80 per cent of Gorgon’s carbon emissions every five years, given its signature carbon injection project only began operation last month.
Chevron argued that the project should only be considered to have reached routine production in July 2018, when the last of three LNG processing trains at Gorgon officially started up, but the EPA rejected that argument. “Chevron has authorisation to construct a fourth gas processing train for the Gorgon gas development,” the EPA said in its decision.
“If the view is taken that routine or steady state operations are not achieved until all processing trains are in production then it is possible to construct the view that ‘operations’ may never commence if plans exist for future trains to come online.”
The EPA ruling may risk sparking fresh tension with one of the state's most powerful energy operators, just months after it shocked the industry with a proposal that would have required major new industrial projects to fully offset their emissions.
Resources companies threatened to pull billions of dollars of investments if the new guidelines were introduced, with Woodside Petroleum, in particular, warning that the plan could jeopardise major projects in the state. The outcry ultimately prompted an intervention from WA Premier Mark McGowan.
The latest advice from the EPA effectively adds three more years of carbon commitments for Chevron and its partners, which could force them to pay costly offsets if it can’t achieve that 80 per cent carbon capture requirement.
A spokeswoman for Chevron said the company was considering the report.
“As the inquiry process is continuing, we are not in a position to comment until the minister makes his determination,” she said. “We are committed to meeting our regulatory obligations and reducing greenhouse gas emissions from our operations.”
Gorgon emitted more than nine million tonnes of carbon dioxide in 2017-18, according to data published by the Clean Energy Regulator, making it one of the biggest single sources of CO2 pollution in Australia.
The company has said it expected the carbon injection system to reduce Gorgon’s carbon emissions by 100 million tonnes over the life of the project. Chevron had hoped the system would give Gorgon the lowest greenhouse gas emissions intensity of any LNG project in Australia.
While it was touted as one of the largest greenhouse gas mitigation projects in the world, its start-up was repeatedly delayed amid persistent technical issues.
Chevron only announced the start-up of Gorgon’s carbon dioxide injection system on August 8.
The federal government has contributed $60m towards the capital cost of the carbon injection project as part of the Low Emissions Technology Demonstration Fund.
EPA’s decision comes about 17 months after WA Environment Minister Stephen Dawson asked the watchdog to look into the conditions surrounding the project. Mr Dawson confirmed on Wednesday he had received the EPA report and would make a final decision in due course.
The EPA has had a chequered history with the Gorgon project, which sits on the Barrow Island Class-A nature reserve off WA’s northwest coast. It originally recommended the project should not go ahead, noting it would be “environmentally unacceptable” if it did not include a scheme to inject a high percentage of the project’s carbon dioxide.
Gorgon’s partners are Chevron (47.3 per cent), ExxonMobil (25 per cent), Royal Dutch Shell (25 per cent), Osaka Gas (1.25 per cent), Tokyo Gas (1 per cent) and JERA (0.417 per cent).