Converting natural gas to liquefied natural gas (LNG) is very expensive and getting more so. Chevron Corp. (NYSE: CVX) last night said that its Gorgon LNG project offshore of Western Australian would now cost $52 billion, up more than 40% from the original cost estimate of $37 billion. Last month Exxon Mobil Corp. (NYSE: XOM) raised its cost estimate for its LNG project in Papua New Guinea by about 20%, to $9.9 billion.
Chevron, like Exxon, attributed the cost increase to higher labor costs, delays and currency exchange rates. In Chevron’s case, the currency impact is responsible for about a third of the cost increase.
Even at the new price increase, Chevron executives say Gorgon is a good deal:
Gorgon project economics are attractive. While investment requirements have grown, oil prices, which directly impact the overall revenue stream, have increased by approximately 80 percent over the…
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