Chevron Corp. (NYSE: CVX) has begun manufacture of liquefied natural gas (LNG) from the third of three production units at the Gorgon LNG project located off Western Australia, the company mentioned on Tuesday. Chevron is the operator of the $54 billion project that has a total of three production trains with a merged production capacity of 15.6 million tonnes per year. First production of the super-cooled fuel from Gorgon started in March last year, but the plant has been inundated by several unplanned outages since then. Chevron most recently suspended production at its Gorgon Train Two production line on March 27.
"We just need to see how reliable that is," a Singapore-based LNG trader said, referring to the plant's troubled production history. "People learnt from previous Gorgon and Angola trains that we need to see how stable their production is."
The Train Three startup may add to the present supply glut in the Asian LNG spot market because some of the production volumes from the new production line are not devoted to buyers, a second trading source said.
"They might do more of the prompt tenders," the source added.
Asian spot LNG prices (LNG-AS) have dropped by 45 percent since early January to $5.40 per million British thermal units (mmBtu) amid new production coming on stream in Australia and the United States. Chevron holds a controlling stake of 47.3 percent in the project, while ExxonMobil and Shell each have a 25 percent stake. The remaining stakes are held by Osaka Gas, Tokyo Gas and JERA.