Gorgon Project (Barrow Island)
On 14 September 2009 the Gorgon Joint Venture (GJV: Chevron, ExxonMobil and Shell) made a final investment decision on its $43 billion gas processing project on Barrow Island, the Gorgon Project. Following this decision, the Premier of Western Australia, Colin Barnett, granted the final development approvals required for the project under the Barrow Island Act 2003 and its Schedule 1 (the Gorgon Gas Processing and Infrastructure Project Agreement 2003). This included the approval of the joint venturers’ proposed carbon dioxide (CO2) injection project (geosequestration project) on Barrow Island.
The Gorgon Project is the single largest investment of its kind in the world, and will be an enormous boost for both the West Australian and Australian economies.
The GJV is expected to commence preliminary construction by the end of 2009 and major construction early in 2010.
About the Gorgon Project
The Gorgon Project is a joint venture between petroleum giants Chevron (50 per cent), ExxonMobil (25 per cent) and Shell (25 per cent).
The GJV plans to develop the Greater Gorgon Area gas fields, located approximately 130km off the north-west coast of Western Australia in Commonwealth waters. These gas fields contain some 40 trillion cubic feet (Tcf) of gas, the nation's largest undeveloped gas resource.
The foundation project is based on the Gorgon, Jansz and Io gas fields in the Greater Gorgon Area. The gas processing part of the project is located on Barrow Island, 70km off Western Australia’s Pilbara coast. The foundation development includes:
- gas production from sub-sea facilities in the Gorgon, Io and Jansz fields located in the Greater Gorgon Area, 130 – 200km from the coast in waters up to 1350 metres deep;
- sub-sea pipelines from these fields to Barrow Island;
- a 300 terajoules per day domestic gas plant and a pipeline from the island, 70km offshore, to join Western Australia’s onshore domestic gas supply;
- three Liquefied Natural Gas (LNG) trains, each capable of producing 5 million tonnes annually on Barrow Island;
- LNG shipping facilities to handle about three shipments each week for international markets; and
- greenhouse gas management through CO2 injection into a deep geological formation beneath Barrow Island.
Barrow Island is home to Australia’s largest operating onshore oilfield and is also a Class ‘A’ Nature Reserve. The oilfield has been operating since the 1960’s and is managed by the Barrow Island Joint Venture (Chevron, ExxonMobil and Santos).
The Barrow Island Act 2003 and the Gorgon Gas Processing and Infrastructure Project Agreement (the Gorgon State Agreement) outline the terms and conditions of the Gorgon Project, including access to the island, supply of domestic gas to the mainland, funding for net conservation benefits, geosequestration of CO2 and local content obligations. The Barrow Island Act 2003 (including Schedule 1) can be accessed through the State Law Publishers website.
For additional project development information visit Chevron’s website.
The project will be a welcome additional supplier of domestic gas (dogmas) to Western Australia. The Gorgon State Agreement requires the GJV to reserve 2,000 petajoules of gas for the local market and to establish (unless commercially unviable) a project on Barrow Island capable of delivering at least 300 terajoules per day of gas to the local market.
The delivery of domestic gas is expected to commence by 31 December 2015 or at the same time LNG is first produced from the third LNG train, whichever is the earlier.
The domgas processing plant will be integrated within the LNG processing facilities on Barrow Island and a pipeline will transport gas to the Dampier to Bunbury Natural Gas Pipeline (DBNGP).
Based on independent research commissioned by the GJV, over the next thirty years it is estimated that the Gorgon project will also:
- create approximately 3,500 direct construction jobs on Barrow Island and approximately 10,000 direct and indirect jobs at peak construction;
- create approximately 300 direct jobs on the island during the operational phase;
- increase State gross product by 4 per cent;
- boost Australia’s gross domestic product by more than $60 billion;
- result in Australian purchased goods and services (local content) of around $33 billion; and
- create new industries centred on CO2 injection and subsea development.
The GJV has entered into agreements with Mermaid Marine (Dampier) and the Australian Marine Complex for supply base logistics support. The GJV has let approximately $10 billion in contracts by 17 September 2009.
Under the Gorgon State Agreement the GJV is required to use local labour, suppliers, professional services, as far as it is reasonable and economically practicable to do so, and provide local suppliers fair and reasonable opportunity to tender or quote during design and the tendering and letting of contracts. In addition, the GJV is required to give preference to local suppliers where price, quality, delivery and service are equal or better than can be obtained elsewhere.
Gorgon CO2 Injection Project
The CO2 injection project was granted approval by Premier Barnett (as the Barrow Island Act Minister) on 14 September 2009. The GJV is proposing to inject up to 3.3 million tonnes of reservoir CO2 into a geological formation known as the Dupuy Formation deep beneath the island. This injection project is expected to be the largest CO2 geosequestration (long term storage) project in the world. The CO2 will be injected in a supercritical state at a depth of greater than 2 kilometres. Based on the GJV’s modelling, the injected CO2 is expected to be contained beneath Barrow Island indefinitely.
Since 2003 the State Government has commissioned independent expert due diligence assessments of the GJV’s plans for the injection project. The most recent study can be accessed via the website of the Department of Mines and Petroleum (see link below). The expert due diligence team concluded that the associated risks are considered manageable through technically comprehensive plans for modelling and monitoring the migrating CO2 plume and the remediation of existing wells near the injection site. Additionally, the team believes the GJV’s work on the injection project to date has exceeded the scope and quality of assessment work preceding any other similar projects. The team generally supports the methodology and the approach the GJV has taken for its future technical work.
Post Closure Indemnity
In August 2009 the Commonwealth Government and the State Government committed to work together to enable the provision of an indemnity to the GJV on closure of the injection project.
The indemnity will be for common law liability arising from independent third party claims for loss or damage, suffered after site closure, as a result of the GJV’s long term storage of reservoir CO2 beneath the island.
Under the current injection project approval, the State Government has not provided the GJV with a post-closure indemnity. This matter will need to first be considered and endorsed by Parliament through a variation to the Barrow Island Act.
It is anticipated that the GJV will be injecting CO2 for the life of the LNG and domgas projects on the island, which could be 60 years or more. For at least 15 years after the cessation of gas production, the GJV will be required to manage and monitor the injection site. An indemnity would only be provided to the GJV once it has satisfied both Governments that the site can be closed.
The GJV is responsible for all costs associated with the project up to the point of closure.
There is a precedent nationally for the provision of post-closure liabilities for CO2 injection projects. In late 2008 the Commonwealth Offshore Petroleum and Greenhouse Gas Storage Act 2006 was passed. This legislation allows for the Commonwealth Government to take on liability post-closure for Carbon Capture and Storage (CCS) projects in the offshore Commonwealth jurisdiction.
In late 2007, the GJV obtained State and Commonwealth Government environmental approvals for a two train 10 Mtpa LNG development. In August 2009, the joint venturers received State and Commonwealth environmental approval for the addition of a third LNG train that will increase LNG capacity to 15 Mtpa. Links to the environmental approval statements are below:
The level of assessment for the 2007 foundation project was an Environmental Review and Management Plan/Environmental Impact Statement. The impacts associated with the addition of a third LNG train were the subject of a Public Environmental Review assessment. Chevron’s website contains background on these assessments.
The environmental approvals have imposed stringent environmental conditions on the GJV, including the requirement to comply with over 20 environmental management plans.
In addition to the requirements of the environmental approvals, the GJV has committed to conservation initiatives and undertakings worth approximately $150 million, including:
- the Northwest Shelf Flatback Turtle Conservation Program, valued at $62.5 million over the life of the project (expected to be 60 years) to increase protection of the turtles in areas away from Barrow Island;
- the Northwest Shelf Flatback Turtle Intervention Program, capped at $5 million, to improve recruitment to the turtle population in the event that monitoring demonstrates an impact upon the turtles;
- the Threatened Species Translocation and Reintroduction Program, valued at $10 million over 12 years, for selected species from Barrow Island to other suitable locations around the State;
- monitoring and auditing of marine activities during the project’s dredging and marine construction phase, up to $2.5 million;
- a financial guarantee, capped at $10 million, to cover Government costs for the eradication of viable non-indigenous species introduced to Barrow Island; and
- $60 million for Net Conservation Benefits (under the Gorgon State Agreement).
The GJV is also required to fund the Department of Environment and Conservation to maintain a permanent management presence on Barrow Island to manage the impacts, if any, on the island’s marine conservation over the life of the project.
Environmental Significance of Barrow Island
Barrow Island was set aside as a nature reserve in 1910 in recognition of its outstanding flora and fauna values. It is currently reserved as a Class ‘A’ Nature Reserve for the purpose of ‘Conservation of Flora and Fauna’, which represents the highest level of protection afforded under State legislation. In 2004, the majority of the waters around the island were included in the Barrow Island Marine Park and Barrow Island Marine Management Area (note that the Barrow Island port area was excluded). The island nature reserve is vested in the Conservation Commission and the marine reserves in the Marine Parks and Reserves Authority. Both are managed by the Department of Environment and Conservation (DEC).
The biodiversity values of Barrow Island are unique and significant on an international scale.
- It is Western Australia’s second largest island at approximately 23,600 hectares, and one of the largest land masses in the world without any established introduced vertebrates.
- Of the known taxa, there are at least 24 terrestrial species that occur nowhere else.
- Thousands of years of isolation have resulted in the genetic differentiation of species, with taxa now endemic to Barrow Island, such as the Barrow Island Euro, White-winged Fairy Wren, Barrow Island Skink, and a subterranean blind snake.
- Most reptile and invertebrate species on Barrow Island appear to be genetically distinct from mainland populations of the same species.
- Barrow Island is considered significant for subterranean fauna at the regional, State and national scales.
- Barrow Island is also a significant nesting site for marine turtles, with four species known to nest on island beaches and a regionally important nesting area for green turtles and flatback turtles. Over 3000 individual flatback turtles have now been recorded nesting on the eastern beaches of Barrow Island.
History to the Barrow Island Act 2003
In 2001, ChevronTexaco put forward a plan to the State Government to develop the large Gorgon field gas reserves, including the possible use of a limited area of the Barrow Island ‘A’ Class Nature Reserve.
Due to the size and potential economic value of the Gorgon gasfields, the high conservation values (including biodiversity) of Barrow Island, and the social importance of these economic and conservation values, the Government determined that a high level evaluation of the Gorgon Gas proposal was required to allow it to make an informed decision on whether to reject or provide in principle approval for the use of Barrow Island for a gas processing complex as part of the initial development of the Gorgon gas project.
As there was no formal process in Western Australia to assess the relationship between the environmental, social and economic costs and benefits of significant development proposals, Government sought advice on environmental matters from the Environmental Protection Authority and social, economic and strategic aspects of the plan from the Department of State Development (formerly, part of the Department of Industry and Resources). Advice was also sought from the Conservation Commission of WA, with whom the Barrow Island Nature Reserve is vested. The GJV produced an Environmental, Social and Economic (ESE) Review for its development proposal.
The State Government released an overview and information pack for a 6-week public review period in July 2003. This document provided the community with access to the key pieces of environmental, social, economic and strategic advice which Government used to make its in-principle decision on the use of Barrow Island for gas development. The outcome of this review by Government was the passing of the Barrow Island Act 2003 (WA) (see attached links).
This was a significant milestone for the Gorgon Project, as it provided in- principle approval for the use of Barrow Island for the development of the Gorgon project. This decision did not obviate the need for formal environmental assessment under the Western Australian Environmental Protection Act 1986 and the Commonwealth’s Environment Protection and Biodiversity Conservation Act 1999.