Chevron says Australian state approves gas project

SYDNEY, Dec 12 (Reuters) US oil major Chevron Corp said on Tuesday the Western Australian government has approved the $11 billion-plus Gorgon gas project in the Australia's northwest.

The project has been beset by environmental concerns, which have pushed back first liquefied natural gas deliveries until after the originally planned date of 2010.

''Chevron welcomes today's announcement which reaffirms the Gorgon participants belief that the project can proceed in an environmentally responsible way on Barrow Island,'' Jay Johnson, managing director of Chevron Australia, said in a statement.

In a separate statement, the Western Australia Environment Minister Mark McGowan said new environmental conditions needed to be fulfilled for the project to go ahead, including an extra A$60 million ($47.1 million) commitment by the Gorgon participants to conserve the flatback turtle population and protect other endangered species, as well as funding a program to relocate threatened species.

The ministry said the new environmental conditions were on top of an existing committment by the project partners to pay A$40 million to the state government for conservation projects.

Chevron, the project operator, holds a 50 percent stake in the Gorgon project while ExxonMobil and Royal Dutch Shell Plc each have a 25 percent stake.

Chevron's shares settled 1.2 percent higher on Monday at $73.70.

Western Australia's Environmental Protection Authority advised the government in June to reject the Gorgon project because it was environmentally unacceptable.

The agency said the impact on flatback turtles nesting on Barrow Island, the introduction of non-indigenous species, and damage inflicted by seabed dredging were too great to allow the project to proceed, even though Chevron already operates an oil extraction and processing facility on the island.

The Western Australian government said Chevron and its partners would also be required to build a geosequestration facility to reinject carbon dioxide from the processing of gas on the island.

The greater Gorgon area project has an estimated gas reserve of about 40 trillion cubic feet (tcf) -- a quarter of Australia's known gas reserves.

Chevron said the Gorgon offshore project, which has a total liquefaction capacity of 10 million tonnes a year, includes a two-train liquefied natural gas (LNG) loading facility and gas processing plant on Barrow Island, located off Australia's northwest coast.

Chevron has made preliminary agreements to sell LNG to Japanese customers, including Osaka Gas , Chubu Electric Power Co. and Tokyo Gas Co. , all of which could also take a small equity stake in the project.

($1=1.28 Australian Dollar) REUTERS PV RAI1141