http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/12/BU3T19LPOU.DTL
Andrew S. Ross
Sunday, September 13, 2009
Even by its own standards, Chevron Corp.'s latest deal is big. And it has nothing to do with crude oil. The San Ramon company is about to officially sign off on a contract involving 40 trillion cubic feet of natural gas to be tapped in Australia and shipped in super-cool, liquid form to burgeoning energy markets in China and elsewhere
"On a capital basis, it will be our largest project ever," said a Chevron spokesman. He would not put a dollar amount on the investment in Australia's vast Gorgon field, but estimates put the total cost, shared with ExxonMobil and Royal Dutch Shell, Chevron's minority partners in the project, at $40 billion.
The payoff is likely to be enormous. Australian Prime Minister Kevin Rudd said the liquefied natural gas sales from the Gorgon field could total $249 billion over 20 years. Japan and South Korea have committed to buying $60 billion worth of the fuel from Chevron once the gas starts pumping in 2014.
A Chinese energy company already struck a $41 billion deal with ExxonMobil, which like Royal Dutch Shell has a 25 percent stake in the project. Expect more such agreements to be announced in the coming weeks.
The project ( www.gorgon.com.au) has passed muster with the environmentally conscious Australian government. Lloyd Avram, a Chevron spokesman, said the project "underwent a rigorous environmental assessment" that resulted in "stringent conditions." Among Chevron's initiatives are plans to build a giant carbon dioxide injection facility in the area, and special lighting technologies to protect flatback turtles on Barrow Island, a protected nature reserve, where the gas is to be processed.
"Gorgon is a key part of Chevron's future," said Avram. "The project feeds long-term demand for natural gas in the growing Asia-Pacific region. It also highlights the importance of Australia to Chevron's gas strategy, commercializing our equity gas resource base to grow a global gas business."
"It transforms Chevron's portfolio," was the way Robin West, CEO of PFC Energy Inc., a global energy consultancy, put it to the Financial Times.
Reading material: Looking for something to commemorate "Lehman weekend," the first anniversary of the Lehman Bros. collapse and the ensuing worldwide crash? Check out "A Colossal Failure of Common Sense," by Lawrence McDonald, a former Lehman VP who was present at the destruction. It's a real page-turner.
Apart from Lehman's own astounding follies, there are lots of local contributors to McDonald's bird's-eye view of the madness. They include the city of Stockton, pioneer of the "NINJA" mortgage ("no income, no job, no assets"), San Jose's Calpine Corp., a prime example of a "crazily overleveraged U.S. corporation" with its "now-you-see-it-now-you-don't-balance sheet," and former S.F. Supervisor Roberta Achtenberg, who as an assistant secretary at HUD pushed banks to provide what turned out to be disastrous mortgages to low-income and minority borrowers.
McDonald's biggest villains are former Lehman CEO Richard Fuld and his toady, the firm's president, Joe Gregory, both of whom give whole new meanings to the word hubris, not to mention "dumb and dumber," as they allowed, nay encouraged, Lehman to compile "almost three quarters of a trillion dollars of pure, unadulterated risk." That brought Lehman, plus Wall Street and much of the financial world, down, in his view.
"It never should have happened," McDonald concludes. If you want to get some insight into why it did, his book is one worthy avenue.
Mark your calendars: Two for Tuesday.
-- A "ChinaBio Day" conference. An offshoot of the city's ChinaSF program, the all-day conference is designed, say its organizers, to facilitate "collaborations and partnerships among biotech decision-makers from the U.S. and China." The conference precedes the three-day BioPharm America 2009 gathering that opens Wednesday. Both take place at the San Francisco Marriott. Registration, speakers, agendas and other details at www.ebdgroup.com.
-- "Hopenhagen." A ad agency-led campaign to support a proposed climate-change treaty in Copenhagen is the topic at San Francisco's Commonwealth Club. Adam Werbach, CEO of Saatchi and Saatchi S, and Seth Farbman, managing director of Ogilvy & Mather, are among the speakers. Details at www.commonwealthclub.org.
Really? "Recession Takes Toll on Living Standards" - Headline in Friday's Wall Street Journal.
Tweeting at twitter.com/andrewsross. Blogging at sfgate.com/ columns/ bottomline. Tips, feedback: E-mail bottomline@sfgate.com.
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