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Australia's LNG industry reaches milestone with 1st Gorgon cargo

TheChevron Australia-ledGorgon LNG liquefaction and export project, one of the largest in the world,recently shipped its first cargo to Japan's Chubu Electric Power Co. Inc.

Thethree train facility will have a combined capacity of 2.1 Bcf/d. To date, it isthe world's most expensive LNG export project, with capital costs growing to$54 billion by 2013, according to the U.S. Energy Information Administration.

GorgonLNG is a joint venture between the Australian subsidiaries of , , , , and Chubu Electric.

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"Includingthe first train from Gorgon, Australia's LNG export capacity currently standsat 6.2 Bcf/d," the EIA said in a March 31 update. "If the additionalLNG capacity currently under development is fully operational as planned by2019, the country's LNG export capacity would likely increase to the largest inthe world, at 11.5 Bcf/d, equivalent of one-third of global LNG trade in 2014."

Japan,the EIA added, "accounts for the largest share of contracted [Australian]liquefaction output, with contracts for 79% of output from the existingliquefaction projects (in operation prior to 2014) and 35% from the newprojects." China is the second-largest destination, but almost half of thevolumes contracted to the country has destination flexibility clauses.

Still,Australia's LNG industry faces major hurdles,particularly labor shortages and high construction costs, in addition to theoil price downturn. WoodsidePetroleum Ltd. announced March 23 that the Browse floating LNGexport project proposed for Australia's west coast had decided to suspenddevelopment due to "the current economic and market environment."

Meanwhile,the U.S. maintains a competitive edge over Australia thanks to existingpipeline and regasification facilities.

"Theinfrastructure for gas [in the U.S.] exists; in places like Australia andMozambique, there has to be more built," HSBC USA managing director DuncanCaird said inFebruary. "Here, a pipeline for [CheniereEnergy Inc.] is 40 miles. There, it's totally different. Pipelinescould have to run for hundreds of miles."