High costs weigh on Gorgon expansion

HIGH labour costs could affect Chevron's decision to push ahead with expansion plans for Gorgon, Australia's largest gas project.

The US energy giant, which is leading the massive Gorgon and Wheatstone liquefied natural gas (LNG) projects in north Western Australia, says Gorgon is roughly 40 per cent more expensive than comparable projects in the Gulf of Mexico.

Chevron Australia managing director Roy Krzywosinski said the cost of locally supplied goods and services had risen dramatically in recent years, while the cost of overseas supplied goods had been relatively stable.

"This weighs heavily on Chevron and its partners as we consider a fourth train expansion of Gorgon," Mr Krzywosinski told the APPEA conference in Perth on Monday.

He said the company was focused on constructing the original "foundation project" and would support an expansion of Gorgon if the cost settings were "corrected".

"To enable these projects to move forward it will require industry, government, buyers, sellers and unions to come together," he said.

It follows a series of delays and cost blowouts to the massive $US54 billion ($A60.02 billion) project.

Joint venture partner Shell recently differed with Chevron on the expected start-up date for the massive 450 million ton project.

Chevron is sticking to its mid-2015 timeline for first gas while Shell predicts it will occur between 2016 and 2018.

"We're going to be commissioning two mega projects in the next year and a half or so and we need to have a very capable and able-bodied workforce," Mr Krzywosinski said.

He said around 1000 employees had been training over the past two years to start up the Gorgon and Wheatstone plants and said there were opportunities for contractors to offer more training.

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