Australian safety regulators issue inspection notice for Gorgon LNG Trains 1 and 3 by August 21

Singapore — Chevron's Gorgon LNG terminal has received notices from Australian safety regulators for the inspection of propane heat exchangers at Trains 1 and 3 by August 21, and for making the specifications of propane kettles compliant with relevant standards.

The notices come after Chevron discovered weld quality issues during a scheduled turnaround on Train 2, on which repairs are ongoing. Chevron said in its earnings call in late July that it expected to restart the train in early September.

However, it is too early to say whether trains 1 and 3 will need to be shut down for the ordered inspections and operators are likely to be evaluating all available options, market sources indicated. The potential for extended outages at Gorgon LNG has supported Asian spot LNG prices in recent weeks, pushing the benchmark JKM price towards the $3/MMBtu level.

Following inspections of Gorgon LNG, the Dangerous Goods Directorate issued a remediation notice for the inspection of the facility's propane heat exchangers on trains one and three no later than Aug. 21, an official at Australia's Department of Mines, Industry Regulation and Safety (DMIRS) said Aug. 7.

"The Dangerous Goods Directorate issued the notice as the nature of the reported cracking in train two is such that there may be similar defects in trains one and three," Director, Dangerous Goods and Petroleum Safety, Steve Emery, said in a statement.

He said a notice was not issued on train two as it was shut, but the department may reassess the train at a later date, and that Chevron is required to provide copies of the inspection reports.

"Under the Dangerous Goods Safety Act 2004, operators are required to comply with all notices issued by an inspector. If an operator does not comply with a notice, the department has a range of enforcement actions available," the statement said.

"DMIRS continues to take the matter seriously and is in close contact with Chevron. The short-term measures Chevron has taken to mitigate the consequences of any potential gas leaks appear sufficient until the welds are inspected," Emery said, adding that DMIRS was unable to provide further details.

Chevron said in a statement that it was committed to the safety of its workforce and operating safely and reliably. It added that it was working closely with the regulator in planning and implementing repair work at Gorgon.

"Chevron confirms receipt of improvement notices relating to propane heat exchangers on Gorgon Train 2 and remediation notices for Trains 1 and 3," a spokesman said. "We continue to work closely with the regulators (Worksafe and DMIRS) in planning and implementing repair work at Gorgon and will continue to do so to address what Chevron discovered during its routine inspection."

KETTLE CONUNDRUM

Propane kettles are used in a liquefaction plant in a cryogenic process to supercool natural gas and turn it into LNG.

On July 29, the WorkSafe department issued eight "Improvement Notices" relating to Chevron's propane kettles at the LNG plant on Barrow Island, one notice pertaining to each propane kettle on Train 2, highlighting that the vessels were manufactured differently to the registered design, DMIRS WorkSafe Director Sally North said in a statement.

"As high-hazard plant, the design must be registered with WorkSafe and the vessels have to be manufactured as per the registered design. In this case, the vessels included a departure from the design," North said.

She said Chevron Australia had until Aug. 28 to make modifications to the vessels to make them compliant with the relevant standards.

"On Aug. 6, a further 24 WorkSafe Improvement Notices were issued. These notices are in relation to plant registration, weld repairs and the requirement to inspect -- and if necessary, repair -- vessels on Train 3," North said, adding that the notices must be complied with by Sept. 24, and WorkSafe's investigation was continuing.

Each of Gorgon's LNG trains has a nameplate capacity of 5.2 million mt/year. Gorgon is operated by Chevron Australia which owns 47.3% of the project, alongside ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and JERA (0.417%).

Its offtakers are SK LNG Trading (4.15 million mt/year), Osaka Gas (1.375 million mt/year), Tokyo Gas (1.1 million mt/year), JERA (1.44 million mt/year), Kyushu Electric (0.3 million mt/year), JX Nippon Oil and Energy (0.3 million mt/year) and GS Caltex of South Korea (0.25 million mt/year).