JOHN PORRETTOHOUSTON (AP) ¿ Exxon Mobil may be synonymous with Big Oil, but two major deals announced this month show the company is focused on expanding natural-gas output. On Tuesday, Exxon said it had reached a 20-year agreement to provide liquefied natural gas to PetroChina Co., Asia's largest oil and gas company, from the yet-to-be developed Gorgon gas field off Australia's far northwest coast. The deal is estimated to be worth $41 billion over the length of the pact, though production could be a few years off. Exxon, the world's biggest publicly traded oil company, earlier signed a 20-year agreement to supply LNG from Gorgon to Petronet LNG Ltd., a major Indian gas importer. The contracts give a big lift to the Gorgon project, which is being developed by Australian units of Exxon and rivals Chevron Corp. and Royal Dutch Shell PLC. Shell and Exxon each have a 25 percent stake, while Chevron holds 50 percent. With the PetroChina contract, Exxon has essentially secured sources for all its potential production from Gorgon, said Lysle Brinker, an industry analyst with IHS Herold.
Brinker noted that developments like Gorgon are becoming increasingly important to majors like Exxon as they find it more difficult to tap new sources of crude and increase production. Most of the world's oil reserves are held tightly by state-run, national oil companies. "The big guys need big projects like this," Brinker said. "The world has changed, and Australia is a big area for the Western (oil companies.) This is the type of project they need to maintain volume growth over the long term." The Gorgon development is expected to pump up to 15 million tons of LNG per year when it achieves full production. The deal still requires final regulatory approval, but the government signaled Wednesday it's unlikely to be opposed on foreign investment or environmental grounds. A final decision is expected next month. Because that decision hasn't been made, Exxon declined to give specifics on its potential investment or say when production might begin. LNG is gas that's cooled to a liquid so it can be transported in large tankers to terminals, where it's warmed back into a gas and shipped through pipelines for use as fuel.
A glut of natural gas and LNG projects around the world is expected to keep supplies of the cleaner-burning fuel high and prices low for the next few years. Amid the dismal global economy and weak energy demand, natural gas prices have fallen from double-digit levels a year ago to around $3.10 per 1,000 cubic feet. Still, because of demand in Asia and other reasons, analysts say they expect to see big producers continue to invest in natural-gas projects. At present, Exxon's proved reserves stand at about 22.8 billion barrels ¿ half of which is oil and half gas, the company said. "With all the new technology, natural gas is getting easier to find," said Brian Youngberg, an analyst with Edward Jones. "And demand is going to continue to grow in Asia. So all these companies are looking for new properties, and Australia is kind of the hot area right now." Said Brinker: "There are growing economies that will need more and more energy, and natural gas is going to be picking up a big chunk of that energy consumption growth, especially in the Asia-Pacific Rim." Exxon Mobil Corp. shares rose $1.51, or 2.3 percent, to $68 in trading Wednesday. Their 52-week range is $56.51 to $83.64.