Chevron Corp. (CVX) – the second-biggest U.S. energy company – entered into a deal to sell liquefied natural gas (“LNG”) from its Wheatstone venture in Australia. The company said that its Australian subsidiary has signed a long-term agreement in this regard with South Korean government-owned Korea Gas Corp. (also known as KOGAS).
As per the contract, Chevron would provide the bulk of the 1.5 million tons of LNG per annum to Korea Gas for a period of up to 20 years. The agreement would also see Korea Gas acquire 5% of Chevron’s equity share in the Wheatstone gas field licenses and the onshore gas processing facilities to be developed by Chevron.
The Wheatstone gas fields, off the coast of Western Australia, are estimated to contain 4.5 trillion cubic feet of gas deposits. Chevron said that the venture will have an initial annual capacity to produce 8.6 million tons of LNG, with the first shipment expected in 2016. A final decision on the project is expected in 2011. Chevron holds a 75% operated interest in the $20 billion project, with the other partners being Apache Corp. (APA) and Kuwait Foreign Petroleum Exploration Co. (KUFPEC).
The Korea Gas agreement follows Chevron’s deal to sell 4.1 million tons per annum of its share from the Wheatstone LNG venture to Japanese utility behemoth Tokyo Electric Power Co. (also known as TEPCO). Additionally, Chevron has entered into multiple deals with Japanese and South Korean companies to sell a major portion of LNG from its Gorgon LNG venture (also in Australia). Incidentally, Japan and South Korea are the world’s top two importers of LNG.
Approximately 75% of the purchases under the Korea gas pact are expected to be through Chevron, while the remaining 25% will come from Apache and Kuwait Foreign Petroleum Exploration Co.
We believe that the sales contract represents an important milestone in Chevron’s efforts to commercialize its share of LNG from the Wheatstone project and is a key step toward a final investment decision by the company. Chevron expects further sales of Wheatstone LNG in the coming months.
The business environment for LNG remains robust, with demand likely to grow at around 8% − 10% annually over the next few years in all major markets. The Wheatstone project provides Chevron and its partners an attractive strategic position for serving the fast-growing economies of China and India, plus other Asian countries.
San Ramon, California-based Chevron is one of the largest publicly traded oil and gas firms in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron is currently rated as Zacks #3 Rank (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our long-term ‘Neutral’ recommendation (6+ months time period).
As per the contract, Chevron would provide the bulk of the 1.5 million tons of LNG per annum to Korea Gas for a period of up to 20 years. The agreement would also see Korea Gas acquire 5% of Chevron’s equity share in the Wheatstone gas field licenses and the onshore gas processing facilities to be developed by Chevron.
The Wheatstone gas fields, off the coast of Western Australia, are estimated to contain 4.5 trillion cubic feet of gas deposits. Chevron said that the venture will have an initial annual capacity to produce 8.6 million tons of LNG, with the first shipment expected in 2016. A final decision on the project is expected in 2011. Chevron holds a 75% operated interest in the $20 billion project, with the other partners being Apache Corp. (APA) and Kuwait Foreign Petroleum Exploration Co. (KUFPEC).
The Korea Gas agreement follows Chevron’s deal to sell 4.1 million tons per annum of its share from the Wheatstone LNG venture to Japanese utility behemoth Tokyo Electric Power Co. (also known as TEPCO). Additionally, Chevron has entered into multiple deals with Japanese and South Korean companies to sell a major portion of LNG from its Gorgon LNG venture (also in Australia). Incidentally, Japan and South Korea are the world’s top two importers of LNG.
Approximately 75% of the purchases under the Korea gas pact are expected to be through Chevron, while the remaining 25% will come from Apache and Kuwait Foreign Petroleum Exploration Co.
We believe that the sales contract represents an important milestone in Chevron’s efforts to commercialize its share of LNG from the Wheatstone project and is a key step toward a final investment decision by the company. Chevron expects further sales of Wheatstone LNG in the coming months.
The business environment for LNG remains robust, with demand likely to grow at around 8% − 10% annually over the next few years in all major markets. The Wheatstone project provides Chevron and its partners an attractive strategic position for serving the fast-growing economies of China and India, plus other Asian countries.
San Ramon, California-based Chevron is one of the largest publicly traded oil and gas firms in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron is currently rated as Zacks #3 Rank (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our long-term ‘Neutral’ recommendation (6+ months time period).
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