Australia has ambitions to dethrone Qatar as the world’s largest LNG producer by the end of the next decade. The Australian government’s current goal is the production of 60 million tons of LNG per year for export. The Australian government is looking to achieve their goal largely through the Gorgon LNG Project. In Greek mythology, a gorgon is a hideous monster, but this Gorgon is a ‘monster’ of liquefied natural gas project in Western Australia.
Gorgon’s network of fields is believed to hold as much as 50,000 billion cubic feet of gas and the 40-year project is expected to produce 15 million tons a year, which is equal to 8 percent of current global capacity.
The Gorgon project has already attracted ready and eager buyers for the LNG that will be produced. PetroChina, China’s largest energy company, agreed to buy $41 billion worth of Gorgon LNG over a 20 year time period. This deal followed another deal for $25 billion worth of Gorgon LNG, again over a 20 year period, to India. Several Japanese utilities have also agreed to purchase LNG from Gorgon.
Three Ways to Profit from the Gorgon Project
The Australian government’s approval for the Gorgon project may turn out to be one of the most significant events of the year for three of the world’s biggest energy companies. These companies are the owners of the Gorgon project – Chevron (NYSE: CVX) owns 50% of Gorgon while both ExxonMobil (NYSE: XOM) and Royal Dutch Shell (NYSE: RDS.B) own 25% each.
One very important point about Gorgon for investors to take note of is that it is a world-class energy asset located in a stable, developed country. This is in sharp contrast to most major energy projects today where oil companies face everything from contracts terms being changed suddenly to assets being seized to kidnappings.
Even for these three companies with a combined market capitalization of more than $600 billion, Gorgon is a large enough project that it can make a material difference.
For Chevron and its investors, the Gorgon project re-calibrates the company’s entire global portfolio. The company will now have a major part of their portfolio located in a stable Western country.
For Royal Dutch Shell and its investors, the Gorgon project confirms the company’s position as a leader in Asian LNG. The company has other LNG projects in Malaysia, Brunei and far eastern Russia.
For ExxonMobil and its investors, the Gorgon project will be important in providing much-needed geographic diversity for its LNG division. Most of the company’s LNG production is currently located in Qatar.
For all three companies, they can now book Gorgon’s reserves in filings with the SEC. This should provide investors, particularly Chevron investors, additional confidence in their long-term prospects at a time when the oil industry is struggling to increase its resource base from which it will create future revenue.
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