BEIJING Dec 6 A $6.4 billion gas project being
built by Chevron in China is facing further delays due
to disagreements with partner PetroChina over how to
develop the technically tricky fields, three industry sources
The Chuandongbei project, the U.S. firm's largest investment
in China, is now not expected to deliver first gas until the
second half of 2014, nearly 7 years after the firms clinched a
30-year deal to produce 7.6 billion cubic metres of gas a year.
The latest setback follows a series of delays for
Chuandongbei, which Chevron has described as one of its larger
capital projects for 2013. PetroChina initially expected first
gas to be delivered in 2010, while its parent CNPC forecast just
four months ago that production would start by end-2013.
China, the world's top energy user, but the fourth-largest
consumer of gas, is racing to unlock supplies of the
cleaner-burning fuel by boosting imports and domestic
"There are some discrepancies over how to develop the fields
between PetroChina and Chevron," said a Beijing-based industry
official with knowledge of the project, a 2,000 square-kilometre
block in Sichuan basin in southwest China.
Chevron is the operator of the project and holds a 49
percent stake. PetroChina holds the rest.
The Chinese government had now suspended its approval for
the development plan for the second stage of the three-stage
Chuandongbei project, to encourage the companies to focus on
delivering the first phase, the sources said.
Chuandongbei is a sour gas development. The natural gas
contains a high level of hydrogen sulphide.
"The complexity of the project, being a high-pressure, high
sulphur development that means higher operational risk and
higher standards for technical processes, also contributed to
the delays," said a second industry official.
As the only international oil firm developing high-sulphur
gas in China, Chevron has imposed stringent safety standards,
sources said, especially after a deadly disaster in 2003 in the
same region that forced the then-head of CNPC to quit.
A blowout in 2003 at a gas well in Chongqing municipality
owned by CNPC turned 25 sq km (10 sq miles) of farmland into a
lethal zone, killing 243 people and poisoning thousands as they
slept or scrambled to escape a toxic cloud of hydrogen sulphide.
However, a similar sour gas development in the same
geological area, the $10 billion Puguang project developed by
PetroChina's domestic rival Sinopec Corp, took 32
months from start of construction to first gas in 2010. It has a
designed annual capacity of 12 bcm.
"Sinopec being the sole owner of the project had a much
stronger sense of execution," said a third industry official
involved in the Puguang development. "It had top attention from
Sinopec management, which pooled the best design and
construction teams to build it."
PetroChina declined comment on the project start-up date.
Chevron said the company has not yet announced a first-gas
date. Chevron "continues to advance the construction of the
first natural gas processing plant and development of the
Luojiazhai and Gunziping natural gas fields for the Chuandongbei
project," a spokesman said by email.
The plant and the two fields make up the first stage of the
project. Chevron said on its website in April that it expected
the plant, which is designed for maximum production of about 2.7
bcm a year to be "mechanically complete" by end-2013.
The full development will include two sour gas processing
plants and five natural gas fields with gathering systems and
tie-ins to the plants. An exploration well is planned for the
third quarter of 2013, Chevron said on its website.
The project, in the northeastern part of Sichuan province,
has proven reserves of 176 billion cubic metres, the two
companies have said.
Chevron is an experienced sour gas developer, and has
partnered with PetroChina to develop gas in Australia. It won
the deal in December 2007, beating rival bidders Royal Dutch
Shell and Total, partly because it pledged
swifter development, sources said.
By last February, Chuandongbei had cost 12.6 billion yuan
($2.1 billion), local media reported. The project is Chevron's
largest upstream investment in China, where it also has a much
smaller offshore portfolio.