Chevron inks $82-bn deal with Tokyo Electric

Will supply LNG, sell stake in Wheatstone project to Jap utility.

Chevron Corp signed an $82 billion contract, Australia’s biggest energy deal, to supply liquefied natural gas to Tokyo Electric Power Co and sell the Japanese utility a stake in its Wheatstone project.

The contract is for up to 20 years and covers almost half Wheatstone’s initial capacity of 8.6 million tonnes of LNG a year, Chevron, the second-largest US energy producer, said today in a statement. Tokyo Electric will purchase 15 per cent of Chevron’s holdings in the field off the Western Australian coast, equal to 11.25 per cent of the project, the utility said in a separate statement, without giving financial details.

Tokyo Electric, Asia’s biggest utility, joins Japanese power producers and Chinese and Indian companies in buying stakes and LNG from Australian projects, diversifying supply sources as utilities increase use of the cleaner-burning fuel to reduce carbon emissions. A final investment decision on Wheatstone is due to be made in 2011.

“This is very positive for Wheatstone’s path to a final investment decision,” said John Hirjee, an analyst at Deutsche Bank AG in Melbourne. “Tokyo Electric Power is an A-grade customer, so from that perspective it’s a very good result for Chevron. With 4 million tonnes, the chances of Wheatstone moving forward are very promising.”

Australian record
Western Australian Premier Colin Barnett called the agreement “an enormous step forward for this project.” With a contract value of A$90 billion ($82 billion), this “would be the largest sales contract for any Australian export industry.”

Gareth Johnstone, a Singapore-based spokesman for Chevron, declined to comment on financial details. Chevron is based in San Ramon, California.

Japan imports 99 per cent of the oil it needs. Tokyo Electric, the nation’s biggest LNG buyer, purchased 20 million tonnes in the year ended March 2009, accounting for about one- third of the country’s imports. It has been burning more gas to make up for the 2007 closure of the Kashiwazaki Kariwa station, the world’s biggest nuclear power plant. The company’s nuclear operating rate was 44 per cent in the last financial year.

Tokyo Electric’s 11.25 per cent ownership of the field would entitle it to 1 million tonnes of LNG a year, and the company will buy the remaining 3.1 million tonnes, the utility said in its statement. The Japanese company also will get an 11.25 per cent interest in onshore processing facilities, to be built at Ashburton North near the town of Onslow, 1,400 kilometers (870 miles) north of Perth.

LNG imports
The company will import 17 million to 18 million tonnes of LNG a year over the next decade, Tokyo Electric said in July.

Tokyo Electric has dropped 23 per cent this year, closing yesterday at 2,310 yen. Chevron has advanced 5.5 per cent in 2009, underperforming the Dow Jones Industrial Average’s 18 per cent rise. The US company’s stock closed at $78.07 yesterday.

Chevron is aiming to develop Wheatstone at the same time as work commences on its $40 billion Gorgon project, also off Western Australia.