December 18, 2024
Chevron Corporation ’s CVX subsidiary, Chevron Australia, has successfully signed a monumental long-term sale and purchase agreement with Alcoa, one of Australia’s largest aluminium producers. This agreement guarantees the supply of natural gas to Alcoa’s operations for the next decade, starting from Jan. 1, 2028. Over the course of the 10-year contract, Chevron will deliver a total of 130 petajoules (“PJ”) of natural gas, sourced from its extensive gas operations in Western Australia (“WA”).
CVX’s portfolio in WA is vast, surrounding some of the region’s largest and most reliable natural gas resources. This includes significant equity interests in three major projects - the Gorgon project, the Wheatstone project and the North West Shelf Venture.
Gorgon Project : As one of the world’s largest natural gas projects, Gorgon continues to play a critical role in domestic and international energy supply. In 2020 alone, the Gorgon project produced 2.1 billion cubic feet of gas and 15,000 barrels of condensate per day, ensuring a stable and robust output that meets local and global demand.
Wheatstone Project : The Wheatstone project, located just 12 kilometers west of Onslow, houses two liquefied natural gas trains, which together have a combined capacity of 8.9 million tons per annum. Wheatstone's domestic gas plant contributes to a vital supply of 530 terajoules per day, representing roughly half of Western Australia’s domestic gas needs. With its advanced facilities, CVX is well-positioned to meet long-term demand for natural gas in the region.
North West Shelf Venture : Chevron’s stake in the North West Shelf Venture further strengthens its standing as a leading gas producer in the region. Holding one-sixth interest, CVX’s contribution to the venture allows for a reliable and scalable gas supply to meet domestic and international requirements.
This gas-supply agreement ensures that Alcoa will continue to receive a steady and predictable supply of natural gas for the next decade. For Alcoa, the long-term arrangement is a crucial element for sustaining the operations of its aluminum smelters, which require significant amounts of energy for production. With this deal, Alcoa can focus on its industrial growth without worrying about gas-supply fluctuations or price volatility.
Chevron’s commitment to providing Alcoa with 130 PJ of natural gas demonstrates the company’s ability to support key industry players in WA and highlights its central role in Australia’s energy landscape. CVX has been supplying gas to Alcoa’s WA operations since 2020. This new agreement ensures the continuation of a productive and mutually beneficial relationship.
Chevron’s ongoing investment in WA’s natural gas sector is a testament to its long-term vision and commitment to the region. The company has already invested more than A$80 billion ($50.75 billion) in its gas projects, including Gorgon and Wheatstone facilities, which have been pivotal in powering the development of WA’s resources industry.
Mark Hatfield, managing director of Chevron Australia, emphasized its strategic role in the region, stating, “As one of WA’s largest domestic gas producers, we are proud to continue our relationship with Alcoa’s WA operations, which we have supplied from our portfolio since 2020.” CVX’s investment continues to enable the long-term, reliable supply of energy, further strengthening its position as a major player in both Australia and global energy markets.
In addition to its local commitments in Australia, CVX has made significant strategic moves on the international stage. CVX recently announced a $2 billion reduction in its 2025 capital expenditure (capex) budget, aligning the company’s investments to focus on key growth areas. Chevron has allocated between $14.5 billion and $15.5 billion for subsidiary capex while planning an additional $1.7 billion to $2 billion for affiliate projects.
CVX also continues to expand its global footprint, as evidenced by the company’s recent assumption of operatorship for the AREA OFF-1 block offshore Uruguay. This move followed a farm-out agreement with Challenger Energy, transferring a 60% stake of the block to CVX’s subsidiary, Chevron Mexico Finance, Sucursal Uruguay, for a transaction valued at $12.5 million (514.93 million pesos). Such strategic acquisitions are key to CVX's growth and long-term energy security.
The landmark agreement between Chevron Australia and Alcoa represents a significant milestone in the long-term relationship between the two entities, guaranteeing a reliable natural-gas supply for Alcoa’s operations over the next decade. This deal not only supports Alcoa’s aluminum production needs but also highlights Chevron’s crucial role as one of Western Australia’s leading gas producers. As the energy sector evolves, Chevron’s extensive investments in WA’s gas resources, coupled with its global strategic initiatives, ensure a stable and secure energy future for Australia and the broader international market.
Currently, CVX has a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Petrofac Limited POFCY, Targa Resources Corp. TRGP and Ovintiv Inc. OVV, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Petrofac is valued at $64.73 million. This oil and gas equipment and services company operates across four segments including Onshore Engineering & Construction, Offshore Projects & Operations, Engineering & Consulting Services and Integrated Energy Services.
Targa Resources is valued at $39.99 billion. In the past year, its shares have risen 110.8%. TRGP is a leading provider of midstream energy infrastructure services in the United States. It offers a wide range of services, including gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids.
Ovintiv is valued at $10.35 billion. This company currently pays a dividend of $1.2 per share, or 3.02%, on an annual basis. OVV is an independent energy producer, which explores and churns out oil and natural gas from diverse assets located in the United States and Canada.
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