Sept 11 (Reuters) - The liquefied natural gas market looks to be tight in the years ahead given a shortage of new projects lined up, partly due to rising costs as demand for contractors to do the work has surged, Chevron Corp’s vice chairman said on Wednesday.
Some Australian LNG export capacity already has been scrapped, while Chevron was forced to add $15 billion to the price tag for its huge Gorgon LNG project in Western Australia.
“The rising costs of contracting will impact the economics of projects, and could temper the industry’s willingness to invest,” George Kirkland, who runs the U.S. company’s oil and gas production arm, said of the industry in general. “The supply is there. Really the question then becomes: can we bring it to market?”
With another large Western Australia LNG export project due to start up for Chevron at Wheatstone in 2016 - less than two years after Gorgon - and with the most advanced one in Western Canada at Kitimat, Kirkland said his company felt pleased it moved fast enough to meet growing Asian demand for natural gas.
The cycle time for LNG plants between front-end engineering design (FEED) work and first gas shipments could run up to eight years, Kirkland said in a lunchtime address to investors at the Barclays CEO Energy-Power conference in New York. Plus, entering that FEED stage represented a $1 billion commitment, he added.
Kirkland saw Canada as a better opportunity for LNG plants than Chevron’s home country, simply because it had a long and unbroken tradition of exporting energy.
He was speaking right before the U.S. government gave its approval for exports from a proposed fourth LNG export facility at Cove Point, Maryland, on Wednesday.
As for meeting Asian demand with gas closer to home, he cast doubt on the most ambitious assumptions about shale in China.
While Chevron was encouraged by early assessments of its own interests there, Kirkland said on a recent trip to China he had heard talk generally of a “considerable reduction in the potential” in the country overall, following early estimates that it had more shale gas than anywhere else in the world.
“Time will truly tell, as it always tells in our business,” Kirkland said. “I always get reminded that we have views, and those views get turned around later, both up and down.”