Chevron's 2nd Train At Wheatstone LNG Project Comes Online

Chevron Corporation (NYSE:CVX) recently achieved a major milestone, as it started production at its second unit of the Wheatstone LNG project in Western Australia, solidifying its position as one of the biggest suppliers of natural gas to the Asian countries.

Chevron’s Mega LNG Projects

While Chevron is the chief operator of the Wheatstone project, owning a 64.14% stake, the remaining interests are held by Kuwait Foreign Petroleum Exploration Company, Woodside Petroleum Limited, Japan-based JERA Inc. and Kyushu Electric Power Company.

The project is located 7.5 miles west of Onslow and is intended to process gas from the Wheatstone and Iago fields, both of which are operated by Chevron. The company holds an 80.2% interest in the offshore licenses containing the Wheatstone and Iago fields. The Wheatstone fields are estimated to contain more than 4.5 trillion cubic feet of gas deposits.

The $34-billion Wheatstone project consists of two liquefaction trains with a shipment capacity of 8.9 million metric tons of LNG per year. The first cargo from liquefaction train 1 was shipped last October, few months behind target. With the second train coming online, Chevron currently operates five LNG trains in Australia, including three at the Gorgon Project.

The Gorgon LNG project is the largest single-resource project in Australia, dealing with delivery of natural gas to international and domestic customers. The $54-billion Gorgon LNG project has a shipment capacity of 15.6 million metric tons per year. While Chevron is the chief operator of the Gorgon LNG project holding 47.3% stake, Exxon Mobil Corporation (NYSE:XOM) and Royal Dutch Shell (LON:RDSa) plc RDS.A own 25% interest each. The remaining stakes are held by Osaka Gas, Tokyo Gas and Chubu Electric Power.

With these major projects starting production, Chevron expects an improvement in free cash flow. The projects are expected to drive long-term growth and boost shareholders’ value in the coming years. By 2020, this Zacks Rank #1 (Strong Buy) company aims to become a major LNG supplier. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apart from Chevron, another Ranked #1 player within the same industry is Sasol Limited (NYSE:SSL) .

Australia’s LNG Sector Booming

Global LNG demand is on the rise owing to consumption boost from Asian importers like China, South Korea and India as part of efforts to switch from coal and heating oil for environmental reasons. The secular shift to cheaper and cleaner burning fuel for power generation resulted in 17 million tons of growth in demand from Asia alone in 2017.

Banking on booming demand, a plethora of new LNG projects are underway in Australia. In fact, the country is expected to overtake Qatar that is currently the world’s highest LNG seller. Australia holds the second spot since 2015 and its position is expected to scale to the top by 2020.

Supplies from Chevron-led Gorgon and Wheatstone mega projects in Australia are already being absorbed by the strong demand. Notably, Wheatstone is the eighth LNG project to be completed in Australia.

Annual LNG export in Australia is expected to reach 74 million tons by June 2019. This will mainly be driven by a number of mega projects including Chevron’s Wheatstone and Gorgon, Shell's Prelude floating liquified natural gas (FLNG) facility, Inpex Corporation’s Ichthys LNG, among others.

Notably, a couple of days back, Prelude FLNG inched closer to production when gas was fed by Shell to the unit from LNG carrier Gallina. Being a significant project in the portfolio of Shell, Prelude FLNG is a path-breaking facility for the emergence of floating LNG. Notably, it is also the first and most versatile in the line of projects planned by the company. The facility will enable the company to unlock new offshore energy sources and provide LNG around the world.

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>