Chevron (NYSE:CVX) plans to start up operations from a liquefied natural gas (LNG) facility in Angola in late June 2012. This facility will handle the production of associated and non-associated natural gas from the country's offshore oil and gas fields.
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Chevron began construction of the LNG facility near the city of Soyo in late 2008 and holds a 36.4% interest in the project. The plant will cost $10 billion and will be able to process 1.1 billion cubic feet of natural gas per day after it ramps up.
Chevron reported gross production of 543,000 barrels of oil equivalent and other liquids in 2011, and has most of its operations in Block Zero and Block 14 located offshore Angola. The company plans to transport the associated gas from these operations to be processed at the Angola LNG.
SEE: Natural Gas Industry: An Investment Guide
Total (NYSE:TOT), Eni (NYSE:E) and BP (NYSE:BP) each own 13.6% of this LNG facility and will also transport associated gas production from offshore fields to the facility to be processed. The companies have operations in offshore Blocks 15, 17 and 18, respectively.
Angola also has significant reserves of natural gas that have not been developed due to insufficient local demand and not having access to a LNG facility. Angola is now planning to develop these natural gas fields in Blocks 1 and 2 and have the LNG plant handle this production.
Chevron's original plan was to transport the liquefied gas to the Gulf LNG Energy plant in Pascagoula, Mississippi, where it would be regassified and sold to markets in the United States. This plant was chosen because it is 20% owned by Sonangol Group, which is the national oil company of Angola.
SEE: How To Profit From Natural Gas
Since markets in the United States are oversupplied and prices are much lower than when the project was initiated, much of the output may be sold to Asian and European markets.
Other operators are also considering building LNG plans to handle stranded natural gas reserves. Anadarko Petroleum (NYSE:APC) has found large amounts of natural gas in offshore Mozambique and will need a LNG facility to handle the production.
Apache Corporation (NYSE:APA), EOG Resources (NYSE:EOG) and Encana Corporation (NYSE:ECA) are building the Kitimat LNG export plant on the western coast of Canada. The project just received a 20 year export license and will handle natural gas production from the Horn River Basin and other areas in the region.
Royal Dutch Shell (NYSE:RDS.A, RDS.B) recently announced a similar plant near Kitimat and is partnering with several Asian companies here. TransCanada (NYSE:TRP) has proposed building a pipeline to connect the plant to Royal Dutch Shell's natural gas fields in British Columbia.
SEE: Uncovering Oil And Gas Futures
The Bottom Line
Angola is starting to become a major force in world oil markets and may soon have similar influence in natural gas as the country will soon become a major exporter of this commodity.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
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