Australia, WA governments accept liability for Gorgon CO2

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CANBERRA, AUSTRALIA: The Australian and Western Australian (WA) governments have agreed to jointly accept any long term liability arising from the storage of carbon dioxide (CO2) in geological formations under Barrow Island as part of the Gorgon liquefied natural gas (LNG) project.

This decision clears a major hurdle for the Gorgon joint venture partners, Chevron, ExxonMobil and Shell, as they move towards a final investment decision before the end of the year.

“It is a great example of governments working in partnership with the private sector to secure Australian jobs, investment, revenue and exports – and grow the wealth of the nation,” said Australia Prime Minister Kevin Rudd in a statement.

The Gorgon Carbon Capture and Storage operation will be a major part of the global portfolio of CCS projects supported by the Australian-led Global Carbon Capture and Storage Institute.

It will also be the world’s largest demonstration of CCS technology for many years to come and receive AUD$60 million (US$49.1 billion) in funding from the Australian Government.

“The Commonwealth’s decision to accept a share of the long term liability for CO2 storage acknowledges the Gorgon LNG project’s scale and significance to the Australian economy, the opportunity it provides to demonstrate CCS technology at industrial scale, and the environmental significance of Barrow Island,” Rudd said.

The AUD$50 billion (US$40.9 billion) Gorgon LNG project will be the biggest single investment ever made in Australia, breaking the record set only a few years ago by the AUD$12 billion (US$9.8 billion) Pluto LNG project now under construction in Western Australia.

Gorgon will provide jobs for about 6,000 Australian workers at the peak of construction and buy about AUD$33 billion (US$27 billion) worth of Australian goods and services over the next few years. The project will also guarantee a significant boost to Australia’s export income with contracts to sell around AUD$300 billion (US$245.5 billion) worth of LNG to customers in the Asia-Pacific over the next 20 years.

Gorgon will deliver at least 150 terajoules/day of domestic gas into the Western Australian market no later than 2015, increasing competition and easing supply side issues for Western Australian industry and households.

It will also generate about AUD$40 billion (US$32.7 billion) in government revenue that will fund schools, hospitals, roads and infrastructure for the state and the nation for decades to come.

Twenty-five per cent of expected Petroleum Resource Rent Tax revenue from the Gorgon project, worth up to AUD$100 million (US$81.9 billion) a year, will be spent on Western Australian infrastructure projects alone, fulfilling a 2007 election commitment of the Rudd Labor Government.

The Commonwealth will now commence early discussions with the WA government on the timing of payments to Western Australia to deliver this commitment.

Western Australia Environment Minister Donna Faragher last week gave final environmental approval for Chevron Corp.’s proposed Gorgon gas development on Barrow Island.

The project now awaits approval by the Australian federal government, according to media reports.

Chevron proposes to add a third 5 million metric ton (5.5 million ton) per year LNG train to the original two-train proposal already approved for Barrow Island.

Chevron is operator of the Gorgon project with 50 percent interest. Partners in the joint venture include ExxonMobil with 25 percent and Shell with 25 percent.

Tagged as: australia carbon, CO2, LNG