Chevron Inc is trying to sweeten its sale pitch in its bid to attract fresh buyers to its underrated Gorgon liquefied natural gas export factory located in the Australian northwest. This $54 billion plant is recently hammered by high costs as demand and prices of oil continuously dropped in the world market.
This move of Chevron Inc is a complete departure from its usual stance of sticking to its high asking prices. But now that oil prices and demand for liquefied natural gas are sliding down with no end in sight, Chevron has started to lower its quoted prices for its 15.6 million-tons-a-year oil plant.
The move of the oil producer is ahead of the scheduled start of operation of the huge plant which is within this month.
John Weston, chief executive of Chevron Inc, described the current LNG market conditions as 'lousy.' Unfortunately, it is this market that the Gorgon plant is designed to penetrate.
Chevron is confronted with a unique situation where it experienced record growth in Australia and the US gas supplies, combined with a depressed market of crude oil which pushed LNG current prices under Gorgon's steep production cost.
Industry sources said that with a few customers, this left Chevron hanging on the hook for one fourth of its share of the unsold volume of the LNG plant this decade, and left it with no option but to unload its supplies to an already dampened spot markets.
The same industry sources suggested that Chevron Inc should instead search for long-term buyers which are willing to pay oil-linked prices, like Chevron's five current Japanese clients, who can help ensure earnings over the Gorgon plant's 40-year lifespan.
Recently, Chevron Inc reported a loss of $588 million for Q4 of 2015. In comparison, the oil company posted $3.5 billion earnings in Q4 2014. Its 2015 full year earnings were reported as $4.6 billion, while in the previous year, it posted $19.2 billion.
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