Something along those lines might be unfolding at the giant Gorgon liquefied natural gas project off the coast of Western Australia – if unsourced media reports are accurate.
According to a Bloomberg report late last week, the company driving Gorgon, Chevron, is thinking about expanding the LNG project by building two gas processing units capable of producing 7.5 million tonnes per annum (MMtpa) of LNG each, rather than the current twin trains at 5MMtpa apiece.
Said quickly, it sounds easy. But as with so many things in life, it’s not as easy as it may seem – even if does make perfectly good sense.
Before dissecting what a 50% increase in LNG capacity at Gorgon might mean, it’s best if The Slug attaches an all-purpose escape clause to this week’s ramble.
For starters, this scribbler has been around long enough to not trust everything he reads in the media.
The Slug’s also has a well-known disquiet about the way Chevron has gone about planning and promoting Gorgon, making all the classic mistakes of a large American company bumbling around in a country that is somewhat more sophisticated than the usual third world places in which it operates.
Other Americans are just as guilty, so the boys and girls and Chevron need not feel too bad about their image. Alcoa has been far guiltier of treating the locals in Australia as country bumpkins.
There is something rather sad about the way the country and its corporations have lost touch with the rest of the world. Perhaps it’s all this security stuff they surround themselves with, or perhaps they have never really understood anything more than 100km from home.
Enough of the Yank-bashing and back to the possibility of expanding Gorgon by 50%, which as any tame economist would tell you is all about the miracle known as economies of scale.
Quite simply, this theory says if it costs $15 billion to built a 10MMtpa plant, it will not cost 50% more to go to 15MMtpa, therefore the cost per tonne of LNG will be lower.
So far so good. But now come the tricky bits such as wondering about the government approvals that are in place for Gorgon.
Unless The Slug is badly mistaken, the environmental tick given late last year was for a 10MMtpa project and lifting it to 15MMtpa might lead to an “axe handle” question about whether it’s the same project, with the same environmental footprint?
To be fair, Bloomberg did not name the two Chevron executives who were allegedly chewing the fat over expanding Gorgon. And it didn’t say what part of Chevron they came from, or even what country.
If they were merely two of the great uninformed mass of Americans who wouldn’t know how to even find their way to Australia, then no harm has been done. Just put it down to ignorance.
If it really was two senior Chevron chaps flagging a major change in the project then perhaps we are in for some deep re-thinking, such as correcting the biggest mistake of all, locating the project’s processing plant on the environmentally sensitive Barrow Island.
It will cost more to build a plant on mainland Australia, but it will also solve a lot of Gorgon’s problems – and perhaps, just perhaps, talk of a 50% increase in the project is part of a wider attack on the economies of Gorgon.
