Chevron to Use 'Lessons Learned' after Angola LNG Missteps

Source: Reuters 9/18/2014, Location: Africa

A string of missteps at a $10 billion Angolan liquefied natural gas venture has hurt Chevron Corp's reputation as a top-notch operator of profitable energy projects around the world. Chief Executive Officer John Watson vowed Chevron will learn from the stumbles, which include multiple electrical fires, pipeline leaks, and even a worker's death after a rig collapsed last summer. The company plans to have the LNG project up and running by next year. "Ultimately, we're accountable for it," Watson said in an interview with Reuters. "There have been some lessons learned on that (Angolan) project. But I don't point fingers. This is our responsibility."

The frank comments, unusual for a major corporate leader, come as Wall Street pressures major energy companies to maintain or boost production to keep profits flowing - a goal made increasingly harder by the rising costs of finding remote oil and natural gas reserves.

The Angolan trouble led Chevron to create an internal project management system to better track contractors and subcontractors on major projects, Watson said. Chevron is the largest stakeholder in the Angolan project, with partners that include Total SA, BP Plc, ENI SpA and Angola's Sonangol.

"We've learned from the experiences at Angola LNG and other projects, working to make sure those same issues, or issues like them, don't happen on the next generation of projects," he said. Watson's comments on the Angola project should help assuage concern the delay could cause the company to miss its 2014 production goals, roughly 2.61 million barrels of oil equivalent per day. "We're still on track to reach that," Watson said.

The Angolan mishaps will help Chevron as it moves forward on engineering and design for its Kitimat LNG project in British Columbia, Watson said, an indication Chevron is unlikely to pull the plug even after Apache Corp quit.

Chevron is also nearing completion on two massive LNG projects off the Australian coast to supply Asian markets.

Shale Threat?

Even as Chevron works on LNG projects, the rise of the North American shale industry has boosted global supplies of natural gas. Chevron is a major natural gas producer in Pennsylvania's Marcellus region.

Yet the company is struggling to lock-in sales contracts for its Gorgon LNG plant in Australia, the world's most-expensive LNG operation.

In Australia, seven LNG projects should be online by 2017, which, taken with the North American shale renaissance, have raised concerns about global oversupply.

Brushing aside any worry, Watson referenced Japan, which is fazing out nuclear power, and China, with a rapidly rising middle class, as major customers. Chevron has said global LNG demand will double from 2012 to 2025.

"We think the demand will be strong for LNG for many years to come," Watson added. "Many countries that don't have these resources will continue to be major sources of demand."

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