Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas

The Shell Group’s grip on the world’s LNG trade has become evident following news that the North West Shelf project and the proposed Gorgon development are running head to head to win a reported $20 billion LNG supply contract from Korean Gas Corporation. Shell is a participant in both of these projects, in addition to a third competing project based in the Sakhalin Islands in Eastern Russia.
Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas
Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas
Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas
Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas
Shell in box seat as Gorgon, NW Shelf, and Sakhalin fight for Kogas

News reports suggested Kogas would be putting the 20-year, 5.3 million tonnes per annum contract to the market this week, turning away from its previous Indonesian suppliers whose contracts expire in 2007.

It was reported that Woodside, as operator of the NW Shelf, and the ChevronTexaco-driven Gorgon will be invited to tender for the supply contract from Kogas, which is the world’s largest single importer of LNG and is desperate to renegotiate and diversify its sources of supply.

Gorgon is not expected on stream until 2008 but a spokesman was reported as expecting tender documents to arrive in the next few weeks. He said they would then look at their ability to deliver on the Kogas timetable.

Shell is also the driver of the Sakhalin-2 project, which is also expected to be invited to bid on the supply contract. The proximity of the Sakhalin Islands would give it some advantage but the Koreans are expected to place a significant part of the contract with projects which have proven reliability and delivery records. Clearly the North West Shelf, as an existing customer of Kogas, has an advantage in this respect.

The Shelf partners, in which Shell has 16.6% as well as a 30% direct stake in Woodside, are hoping this extra Kogas deal will give them the impetus to kick start the fifth train at the facility. The fourth train is in the process of being commissioned.

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