Chevron will ship its first LNG cargo from the $US54 billion ($70.5 billion) Gorgon project before year's end and said the monster venture would be "nicely profitable" despite the drop in crude oil prices.

Incoming head of upstream, Jay Johnson said gas would arrive at the plant being constructed on Barrow Island off the WA coast "any day", to be used to fire up the first gas turbine generator. First production would be in the third quarter, and the first LNG exports by the end of the year.

Gorgon, the biggest single resources project ever built in Australia, was originally expected to begin production in late 2014 but its schedule has slipped, while the budget has also surged from an initial estimate of $US37 billion when approved by its partners in September 2009. The start-up timing given in the briefing confirms output will at least commence this year, despite some concerns in the market that it could slip into 2016.

"We're pleased with the progress we've seen, particularly over the last several months," Mr Johnson told investors in a briefing in the US, commenting on construction at Gorgon and Chevron's second megaproject in Australia, the $US29 billion Wheatstone LNG venture.

Construction of Gorgon is over 90 per cent complete, while Wheatstone, which is scheduled to start up in 2016, is 57 per cent complete.

Last year's oil price collapse raised fears that Gorgon and some other new LNG projects in Australia would not be economic, given sales prices for LNG are directly linked to crude oil in Asia.

But Mr Johnson noted the ventures will produce over decades and was enthusiastic about cash generation.

"Gorgon is a world-scale project that is expected to deliver prolific cash generation over the next 40-plus years and we are getting close to seeing it come to life," he said.

"Like Gorgon, Wheatstone is an outstanding project that is expected to deliver decades of cash flow and earnings."

Construction on Barrow Island, which had earlier been hampered by productivity issues, was making "steady progress", with all the plant modules installed for the first of the project's three LNG "trains", Mr Johnson said, adding that the loading jetty was structurally complete and the control centre functional.

The second and third LNG trains at Gorgon are to start production next year. ExxonMobil and Royal Dutch Shell each owns 25 per cent of the project.

Chief executive John Watson said the returns achieved on Chevron's new projects would vary considerably depending on depreciation rates but that the LNG projects, where reserves are booked early on, would make money.

"In the case of Gorgon and Wheatstone, they'll be nicely profitable even down at low prices if you look at depreciation rates we expect and opex, they'll be nicely profitable," Mr Watson said.

The executives didn't give any indication that an expansion of Gorgon is likely in the short term, despite the addition of a fourth LNG train being recommended last week by the WA Environmental Protection Authority for approval. At one stage, Chevron was aiming to begin engineering work on an expansion in 2013, though ExxonMobil and Shell preferred to see the foundation project start up before committing any further capital to take capacity to about 20 million tonnes a year.

The EPA's recommendation for the fourth train to be approved has to go through a public appeals process and be scrutinised by the state and federal environment ministers before a final government decision, expected in April.

Source - http://www.smh.com.au/

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