Massive Gorgon project gets sign off

By Paula Wallace

Investment in Gorgon heralds ‘new era’ in resources

The agreement to proceed with the largest energy resources project in Australia to date will boost the national economy and provide jobs for thousands of Western Australians.
Premier Colin Barnett welcomed the agreement of all parties at a signing ceremony held in Perth.
At the ceremony:
• the Gorgon Joint Venture participants, Chevron, ExxonMobil and Shell, announced their final investment decisions
• Premier Colin Barnett signed the final development approval required under the Barrow Island Act 2003 and the Gorgon Gas Processing and Infrastructure Project Agreement and
• the Joint Authority, Mines and Petroleum Minister Norman Moore and Federal Resources, Energy and Tourism Minister Martin Ferguson, granted production licences for the Gorgon and Jansz/Io gas fields.
The project is estimated to cost approximately AUD$43 billion for the first phase of development.
Initial work will begin immediately on Barrow Island. First gas is planned for 2014.
“Gorgon will be an important pillar of the Australian economy for the next 40 years,” said Chevron Australia managing director, Roy Krzywosinski.
He added, “Gorgon is a long term, technically complex project that will mark a step-change and dramatic advancement of engineering, developing new frontiers in up to 1,300 metres of deepwater, and best practices in environmental management.
“To engineer, build and operate this project, we have brought together the best and brightest from Chevron, our partners and industry,” said Krzywosinski.
“Gorgon will be a global leader in the application of underground carbon dioxide injection technology. The decision to invest approximately A$2 billion to inject naturally occurring, reservoir carbon dioxide into a deep reservoir more than 2,000 metres beneath Barrow Island, is a clear demonstration of Chevron’s commitment to reducing greenhouse gas emissions,” he said.
Economic modelling by analysts ACIL Tasman has indicated the Gorgon project will boost Australia’s gross domestic product by $65billion, with about $33billion flowing to goods and services purchased in Australia.
While the majority of revenues from the project will flow to the Commonwealth, WA Premier Colin Barnett welcomed the Federal Government’s commitment that 25 per cent of expected Petroleum Resource Rent Tax from the project, worth up to $100million a year, will be spent on Western Australian infrastructure projects.
“Contracts valued at approximately $2billion have been let with a further $10billion of contracts to be awarded in the next three months,” said Barnett.
“The State Government has a local content policy in place and has been working with the Chamber of Commerce and Industry through the Industry Capability Network to ensure local businesses can be involved and benefit from the Gorgon project.”
Barnett said the project also marks a high point for environmental approvals in Australia.
“This project has faced what is possibly the most stringent environmental assessment ever applied in Australia,” he said.
“Barrow Island has been an A class reserve since 1910 and supports at least 24 unique plant and animal species. Oil production has occurred on the island since 1964 and it is a compliment to the Gorgon Joint Venture participants that they have been allowed to proceed with this project.”
The environmental conditions that have been imposed will ensure:
• Coral lost due to dredging is minimised to three per cent of the total coral off the east coast of Barrow Island
• Artificial light and noise emissions are minimised to protect the local population of northwest shelf flatback turtles
• A turtle conservation plan is in place for the life of the project
• Monitoring of other unique and endangered fauna.
The first LNG is due in 2014 and domestic gas is planned by the end of 2015. The Gorgon Joint Venture participants have already entered into long term LNG sales and purchase agreements with customers in Japan, China, India, South Korea and North America.
In WA, expressions of interest have been sought for the first 150 tj/d of domestic gas.

Gorgon set to be world's biggest CO2 storage project

The Chevron* led joint venture to develop the Gorgon Liquefied Natural Gas (LNG) and domestic gas project, could become the world’s biggest carbon capture and storage (CCS) project if it receives investment approval.

Chevron says it is the first such project to undergo environmental assessment, which could provide valuable insights for a coal industry which acknowledges that CCS is essential to its long-term future.
Dr Peter Cook from the Co-operative Research Centre for Greenhouse Gas Technologies told The Australian Journal of Mining, “I think that over the next few years the opportunity to learn about carbon capture and storage is going to come more out of the oil and gas industry than the coal industry…from the point of view of the coal industry this is great opportunity.”
Having recently received the green light from Environment Minister Peter Garrett, the Gorgon Project aims to extract natural gas from the Gorgon and Jansz fields over a period of around 40 years. It is being touted as Australia’s largest energy resource project, forecast to generate more than $200 billion in sales and $40 billion in tax revenue, and to double Australia’s annual production of LNG.
The development plan calls for a three-train, 15 million-metric-tonne-per-year LNG facility on Barrow Island, located off Western Australia’s Pilbara coast, integrating domestic gas into the project.
“The most important thing that I can guarantee is that we’re going to store over 120 million tonnes of CO2 which I think is really the story here,” the general manager of the Greater Gorgon Area for Chevron Australia Colin Beckett told the ABC.
“This is an amazing endeavour. It is building on the experience of other places in the world. The oil industry has been using CO2 to help remove oil for over 40 years…so we are building off previous experience and we have very high confidence that this is going to be a successful operation.”
He said the Chevron joint venture has spent almost a decade, and $100 million, in investigative works to select the optimum location and ensure that “the system will function properly.”
The Chevron joint venture plans to share the results of its monitoring program with other industries, and it has been cited by Government here as a cutting edge example of CO2 injection technology.
While the coal industry has been talking about the promise of CCS for the better part of a decade, it may be Gorgon which proves to be the next commercial-scale sequestration operation.
Currently the biggest CCS project in Australia, located in Victoria’s Otway Basin, has been running a pilot plant for more than a year which has successfully injected around 65,000 tonnes of CO2 underground.
For Australia to meet it greenhouse gas (ghg) reduction targets in the future, it may need to store up to 1.6 to 1.7 billion tonnes of CO2 from the electricity generation sector by 2050, under modelling related to the Federal Government’s proposed Carbon Pollution Reduction Scheme (CPRS).
The biggest existing carbon sequestration project in the world, Norway's Sleipner field, has taken about one million tonnes a year since 1996.
And, based on modelling by energy consultants McLennan Magasanik Associates, it is predicted CCS won’t actually become commercially viable until around 2030.
In May, the Federal Government announced $2.8 billion would be set aside to fund clean coal initiatives, including $2.4 billion to fund between two and four ''flagship'' commercial-scale, coal- or gas-fired power stations with CCS over the next nine years. Funding is to be matched 1:3 by industry and State Governments. Applications have been submitted to Energy & Resources Minister Martin Ferguson who should announce his decision this year.
“If the will was there, and Government and industry were prepared to get behind it you could have it happening by 2015 or 2017, not on a massive scale” said Dr Cook, referring to CCS integrated with power generation at scale.
“Without that commitment it will be beyond 2020, there is a definite window of opportunity to get them going over the next decade.”
The time critical nature of CCS development for the production of cleaner energy was highlighted in an ABC program aired on September 7th. It reported that an enquiry into the collapse of the US-based FutureGen CCS project, produced a document from the US Department of Energy which stated:
“Without FutureGen, the availability of affordable coal fuelled CCS plants would be delayed at least 10 years and will not allow for widespread deployment of carbon capture and storage until nearly 2040.”
The newly formed Global Carbon Capture and Storage Institute, based in Australia, has a mandate of facilitating development of 20 integrated, industrial-scale CCS demonstration projects worldwide by 2020 – that’s 11 years from now.
With such differing time frames and forecasts it's not clear when CCS integrated with power generation at scale will become a proven technology, and when it might become widely deployed to produce “cleaner” electricity.
While the Gorgon Project is set to operate the biggest underground storage site of CO2, it won’t actually help Australia to lower its ghg emissions. The CCS part of the program will sequester 40 per cent of the operation’s total emissions which could be in the order of six to eight million tonnes per year.
The liquefaction of natural gas is a ghg intensive process, however the downstream use of LNG for power does reduce emissions by 34 per cent compared with coal-fired power.
Over the last few years the Chevron joint venture has been appraising the Dupuy Formation, below Barrow Island, with the objective of further refining the injection location within the Dupuy Formation. This has included the drilling of a dedicated data well, seismic surveys and laboratory studies.
The Western Australian Government has undertaken four rounds of independent technical review of the Gorgon Carbon Dioxide Injection Project in order to validate the work of the joint venture and to provide independent assurance that risks associated with the project are acceptably low.
These reviews have included experts from Western Australian universities, the CRC for Greenhouse Gas Technologies and several international research organisations.
“The risk is really very low and you have to counter that with the risk of allowing more CO2 to get into atmosphere and affect the level of climate change,” said Dr Peter Cook.
“Risk arising from a well characterised site…where you know the geology well, you can reasonably say there is a low risk of leakage.”
Being a Class-A Nature Reserve, environmentalists claim there will inevitably be degradation of the environment on and around Barrow Island. They now plan to focus their lobbying on the joint venture companies to have the Gorgon processing facilities moved to the mainland.
In approving the Gorgon project, Minister Garrett applied an additional 28 environmental conditions. While this will add to the price tag of the project which is running at anywhere between $1 billion to $2 billion, these had largely been figured in according to Colin Beckett.
Perhaps ironically, what may present a challenge to this significant development in CCS is the proposed emissions trading scheme, which could add another $100-200 million to operating costs each year.
A final investment decision on the Gorgon project is expected in the second half of 2009, after all Government approvals have been received, after sufficient LNG sale agreements have been secured and following the completion of front-end engineering and design work.
Project start up is expected in 2014.

* The Gorgon Project is being pursued by the Australian subsidiaries of three leading international energy companies: Chevron, ExxonMobil and Shell. Chevron is operator of the Project with a 50 per cent interest, and ExxonMobil and Shell each hold a 25 per cent interest.
The Kellogg Joint Venture (KJV) is undertaking the Front End Engineering and Design (FEED) for the Downstream processing facilities and the Liquefied Natural Gas (LNG) plant including export facilities to be located on Barrow Island. KJV is an unincorporated joint venture between KBR, JGC Corporation, Hatch and Clough.