Chevron to Idle Gorgon LNG Unit in May

April 30, 2018

World Energy Reports LLC.

Chevron will idle the second production unit at its Gorgon liquefied natural gas (LNG) project in May to carry out modifications already implemented at the other two units, a senior executive said.

Pat Yarrington, Chevron's vice president and chief financial officer, said in an earnings call on Friday that Gorgon Train 2 in Australia has a planned "pit stop" in May for crews to replicate performance improvement modifications.

Traders said the maintenance is expected to last 30 days.

The work will focus on remedying vibration problems already fixed on Trains 1 and 3, they said.

A company spokesman declined to comment on the maintenance duration or the issues being addressed.

Meanwhile, work on Chevron's second Australian LNG mega-project in Australia, at Wheatstone, is progressing, Yarrington said.

LNG production at Wheatstone's first train started in October 2017. The company expects to start LNG production from the second train this quarter, Yarrington said, bringing the facility to its annual target output of 8.9 million tonnes.

Chevron also plans to exploit global gas supply deficits forecast early in the next decade by boosting production from existing trains at Gorgon and Wheatstone through a process known as debottlenecking, vice-president of midstream Mark Nelson said.

"Only the most cost-competitive projects will be able to move forward in this space and we will be very disciplined with our investment and will fund only those projects that will generate top returns," he said, adding it was premature to consider building entirely new trains.

Boosting output via low-cost debottlenecking could improve Gorgon and Wheatstone profit margins which, burdened by among the highest per metric tonne cost of production, struggle in the low-price environment.

Asian spot LNG prices for June delivery are trading at $7.95 per million British thermal units (mmBtu), compared with a range of $12-20 per mmBtu between 2011 and 2015.

(Reporting by Oleg Vukmanovic, Jessica Jaganathan and Sonali Paul; editing by Louise Heavens)

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