Oil and gas giant Chevron has warned of potential production delays at the US$54 billion Gorgon project in Western Australia, while revealing the timetable for Wheatstone has recently come under pressure.

Speaking to investors late last week in light of the company’s second-quarter earnings, Chevron executive vice president Jay Johnson said it could not guarantee first LNG cargo would be produced by the revised target of late 2015.

“The schedule is dependent on managing commissioning and start-up risks including equipment malfunctions, possible labor and weather disruptions, as well as other unforeseen issues,” Johnson said. “Our focus is on a safe and incident free startup that leads to reliable long-term operations.

“We are working to achieve the first LNG cargo by year end; however, given these risks, it’s likely to occur in early 2016,” he said.

Gorgon was initially slated to produce gas in early 2015 at a cost of US$37 billion when the final investment decision was made. In 2013, Chevron pushed the timetable for first gas to mid-2015, but more recent company rhetoric referred to a revised start-up date of late 2015.

Along with timing delays, Chevron has twice revised the capital cost for Gorgon, blaming weather delays, a high Australian dollar, logistical issues and low productivity for the cost overruns.

Despite the many challenges encountered at the megaproject, there is only months left on Gorgon’s development timetable with the 15.6 mtpa project now more than 90% complete.

At the plant, located on Barrow Island, Johnson said all LNG and condensate tanks required for first LNG were ready with commissioning of completed process systems underway.

“We expect to perform the first commissioning run of the compressors and testing of the hydrate prevention system in late September,” he said.

Discussing the progress of Chevron’s other development asset, Johnson said the $29 billion Wheatstone LNG project was now more than 65% complete.

Hook up and commissioning was on plan with all subsea structures installed. At the plant site, 11 of 24 major process modules for train 1 have been delivered, while all refrigeration compressors and gas turbine generators have been installed and the domestic gas pipeline has been completed.

“The focus of activity at the plant has shifted from civil works to mechanical, electrical and instrumentation systems,” Johnson said.

While Johnson described the work on site as “going very well,” he said the biggest challenge had been the delays in module delivery from a fabrication yard which was “putting pressure on the schedule.”

“To address the delays we've expanded to an additional yard and provided increased oversight in the yards,” Johnson said. “We've seen positive results from these actions and are not anticipating any further delays in the module delivery schedule.

“Our objective remains first LNG by year-end 2016 and we will continue to provide updates on our progress over the next 18 months,” he added.

Chevron reported a $571 million profit for the second quarter, down from $5.7 billion in the previous corresponding year.

The company also booked impairments totaling $1.96 billion.

Lauren Barrett can be reached at lbarrett@hartenergy.com

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