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Chevron's (CVX) Gorgon LNG Facility Faces Production Disruption
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U.S. energy major Chevron Corporation (CVX - Free Report) has stated that one of its three LNG trains at Australia’s Gorgon LNG Facility will remain offline for five weeks. The LNG train has been offline since Apr 30, 2024, owing to a mechanical fault in a turbine. Management has noted that they have begun working to repair the fault and the process may take several weeks.
The Gorgon LNG project has a nameplate capacity of 15.6 million tonnes per annum. It is located on Barrow Island, offshore Western Australia. Exports from the facility will face disruptions in the current month as the operator continues to work on restoring production from the train.
It has been reported that each week of downtime on one train at Gorgon decreases the terminal's liquefaction capacity by approximately 100,000 tons. Since, the shutdown is projected to be for five weeks, it is expected to result in a reduction of terminal production by about 5-8 cargoes. Each standard-sized cargo is estimated to be equivalent to 60,000-70,000 tons of LNG.
A representative of Chevron Australia has said that despite the shutdown, the domestic gas supply and the remaining two LNG production trains at the facility remain unaffected and will continue to operate at full capacity. The spokesperson also mentioned that relevant stakeholders have been informed and CVX will keep them updated as repair works progresses and Gorgon resumes full production safely.
Market participants anticipate that the shutdown of one train at the Gorgon facility will have a limited impact on both prices as well as supply, as there are sufficient cargoes for the months of June and July. There may be a temporary surge in prices due to affected buyers seeking a prompt replacement of the lost LNG from Gorgon. However, the shutdown may have a greater impact on prices if it takes a longer duration to repair the fault and it affects summer deliveries.
According to traders, CVX has rescheduled some of the LNG deliveries for Asian buyers. Shell may have also secured 3-4 cargoes because of the shutdown at Gorgon.
The company’s LNG facilities in Australia have faced several operational challenges previously. In November 2023, one of the LNG trains at the Gorgon facility operated at reduced capacity owing to an electrical incident. Prior to this, a fault at the Wheatstone LNG export facility led to a decrease in LNG production at the plant by 25%. This incident coincided with the escalation of workers’ strikes at the two CVX facilities in Australia.
The Gorgon LNG project is a joint venture operated by Chevron who holds a 47% stake, along with ExxonMobil and Shell who hold 25% each. Other stakeholders in the project include Osaka Gas with 1.25%, Tokyo Gas with 1% and JERA 0.417%.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess is a leading upstream energy company, with its operations focused on the prolific resources offshore Guyana. The company has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. These discoveries have totaled more than 11 billion barrels of oil equivalent in gross recoverable resources, adding to Hess’ production potential.
Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.
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Chevron's (CVX) Gorgon LNG Facility Faces Production Disruption
U.S. energy major Chevron Corporation (CVX - Free Report) has stated that one of its three LNG trains at Australia’s Gorgon LNG Facility will remain offline for five weeks. The LNG train has been offline since Apr 30, 2024, owing to a mechanical fault in a turbine. Management has noted that they have begun working to repair the fault and the process may take several weeks.
The Gorgon LNG project has a nameplate capacity of 15.6 million tonnes per annum. It is located on Barrow Island, offshore Western Australia. Exports from the facility will face disruptions in the current month as the operator continues to work on restoring production from the train.
It has been reported that each week of downtime on one train at Gorgon decreases the terminal's liquefaction capacity by approximately 100,000 tons. Since, the shutdown is projected to be for five weeks, it is expected to result in a reduction of terminal production by about 5-8 cargoes. Each standard-sized cargo is estimated to be equivalent to 60,000-70,000 tons of LNG.
A representative of Chevron Australia has said that despite the shutdown, the domestic gas supply and the remaining two LNG production trains at the facility remain unaffected and will continue to operate at full capacity. The spokesperson also mentioned that relevant stakeholders have been informed and CVX will keep them updated as repair works progresses and Gorgon resumes full production safely.
Market participants anticipate that the shutdown of one train at the Gorgon facility will have a limited impact on both prices as well as supply, as there are sufficient cargoes for the months of June and July. There may be a temporary surge in prices due to affected buyers seeking a prompt replacement of the lost LNG from Gorgon. However, the shutdown may have a greater impact on prices if it takes a longer duration to repair the fault and it affects summer deliveries.
According to traders, CVX has rescheduled some of the LNG deliveries for Asian buyers. Shell may have also secured 3-4 cargoes because of the shutdown at Gorgon.
The company’s LNG facilities in Australia have faced several operational challenges previously. In November 2023, one of the LNG trains at the Gorgon facility operated at reduced capacity owing to an electrical incident. Prior to this, a fault at the Wheatstone LNG export facility led to a decrease in LNG production at the plant by 25%. This incident coincided with the escalation of workers’ strikes at the two CVX facilities in Australia.
The Gorgon LNG project is a joint venture operated by Chevron who holds a 47% stake, along with ExxonMobil and Shell who hold 25% each. Other stakeholders in the project include Osaka Gas with 1.25%, Tokyo Gas with 1% and JERA 0.417%.
Zacks Rank and Key Picks
Currently, CVX has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are SM Energy (SM - Free Report) , Hess Corp. (HES - Free Report) and Eni SpA (E - Free Report) . SM Energy and Hess presently sport a Zacks Rank #1 (Strong Buy) each, while Eni carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess is a leading upstream energy company, with its operations focused on the prolific resources offshore Guyana. The company has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. These discoveries have totaled more than 11 billion barrels of oil equivalent in gross recoverable resources, adding to Hess’ production potential.
Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.