March 28, 2017 / 4:30 AM / 3 years ago

Chevron starts production at Gorgon Train Three LNG project

The logo of Chevron (CVX) is seen in Los Angeles, California, United States, April 12, 2016. REUTERS/Lucy Nicholson/File Photo

SINGAPORE (Reuters) - Chevron has started production of liquefied natural gas (LNG) from the third of three production units at the Gorgon LNG project located off Western Australia, the company said on Tuesday.

Chevron is the operator of the $54 billion project that has a total of three production trains with a combined production capacity of 15.6 million tonnes per year.

First production of the supercooled fuel from Gorgon began in March last year, but the plant has been plagued by numerous 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 could add to the existing supply glut in the Asian LNG spot market because some of the production volumes from the new production line are not committed to buyers, a second trading source said.

“They might do more of the prompt tenders,” the source added.

Asian spot LNG prices have fallen 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.

Reporting by Mark Tay; Editing by Richard Pullin and Christian Schmollinger

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