Slugcatcher smells gas amongst the Libs' election wreckage

STAND by for the Gorgon go-ahead, because Saturday’s re-election of the Gallop government in Western Australia means that the last potential political impediment to the $A11 billion project has been removed.
Slugcatcher smells gas amongst the Libs' election wreckage Slugcatcher smells gas amongst the Libs' election wreckage Slugcatcher smells gas amongst the Libs' election wreckage Slugcatcher smells gas amongst the Libs' election wreckage Slugcatcher smells gas amongst the Libs' election wreckage

That possible obstruction was the leader of the opposition in WA, Colin Barnett. He didn't favour the proposed location of onshore gas processing facilities on Barrow Island, preferring to see Gorgon gas delivered to the mainland.

If Barnett had made it to the Premier’s office there is a reasonable chance that he would have asked ChevronTexaco, and its partners in Gorgon, to re-work their designs. This would almost certainly have triggered a delay and lost a window of opportunity to cash in on the current boom in demand for liquefied natural gas.

With Barnett losing the election, and then quitting, Gorgon has a four-year political window to make its move.

In fact, four months or even four weeks, is all that it is likely to take for the Gorgon boys to kick-start the next phase of the complex business of building a LNG business.

For starters, they need to nail down a big initial customer, most probably the China National Offshore Oil Corporation (CNOOC). Work on that aspect is well in hand.

Then there is the next phase of the design work, the subsea upstream contract which is the subject of competitive bids by Technip/Kenny and Fluor/Intec – followed by a host of other decisions.

With luck, the contract awarding process can start soon, followed by a deal with CNOOC that is likely to feature the Chinese buying a direct 12.5% stake in Gorgon, and committing to the long-term purchase of about 40% of future production from Gorgon.

Lining up these ducks will take time, but a mid-year formal commitment remains on track – especially now that the last potential political cloud has blown away.

Barnett’s stand was a curiosity in the 30-year history of Gorgon. The gasfields, with their remote location and high carbon-dioxide content, have always needed strong political backing – even more so when it became clear that the Barrow Island option was the best way to see their development.

For the Gallop government, which prides itself on having good green credentials, support for Barrow was a risk, which made Barnett’s stance look more opportunistic than a genuine attempt to find a better location for the main processing plant.

Re-election for Gallop, and strong support for Barrow Island before the state poll, means that there will be no political obstruction to Gorgon.

Hints that local politics were standing in the way of a formal commitment, or the awarding of the next key design contracts, have been in the air since the end of last year.

Two weeks ago the head of the federal department of resources, John Hartwell, let a small cat out of the Gorgon bag when he told a Senate committee that “we understand that there may be an announcement in the near future about the project going forward”.

In other words, a draft of the Gorgon go-ahead is on John’s desk, waiting for the political winds to stop blowing through Perth.

Another hint that an announcement is near came earlier in the month when the subsea contract decision was delayed for a month - just long enough to get the state election out of the way.

And now, drum roll, it’s curtain time for the ugliest gasfield in Australia, bring on the Gorgon!