Global integrated energy company, Chevron Corporation’s (CVX) Wheatstone liquefied natural gas (LNG) project has won the environmental approval from the West Australian state government. While the permit takes the multi-billion dollar project a step ahead, it comes with 25 conditions on the protection of marine fauna, including whales, turtles and dugongs.
Per these conditions, Chevron and its partners will have to pay approximately $13.9 million for environmental benefits. The company now awaits a timely clearance from the country’s Federal government. Chevron expects to make the final investment decision on the project later this year.
Located about 124 miles north of Onslow, off Western Australia’s Pilbara coast, the Wheatstone venture is proposed to be built with an annual output capacity of 25 million metric tons of LNG. The initial phase will see the construction of two processing units, known as trains, with a combined capacity of 8.9 million tons of LNG a year and a domestic gas plant.
Chevron acts as the operator of the project with a 73.6% interest, while the remaining stake is shared by Apache Corporation (APA) (13%), Kuwait Foreign Petroleum Exploration Co. (7%) and Royal Dutch Shell plc (RDS.A) (6.4%). The Wheatstone project is expected to come online by 2016.
We believe that the Wheatstone project is one of Australia’s largest resource projects targeted toward providing considerable economic benefits such as employment, government revenue and local business opportunities. Coupled with the other prominent Gorgon Project, this facility will hold the leadership position among natural gas and LNG suppliers in the Asia-Pacific belt.
San Ramon, California-based Chevron is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
We believe that Chevron possesses a rich variety of oil and gas development projects across the globe. With an impressive business model, emphasis on upstream portfolio and a healthy balance sheet, the company will be able to deliver superior performances in the coming months.
However, Chevron remains particularly susceptible to continued weakness in the global economy and international business risks. As such, we see the stock performing in line with the broader market and maintain our long-term Neutral recommendation. Chevron currently retains a Zacks #3 Rank (short-term Hold rating).
