Chevron Corporation (CVX), a major oil and gas company, revealed that the facility's flagship carbon capture and storage project is running at only 30% of its potential due to several issues.
The massive Gorgon plant on Barrow Island, the largest single-resource project in Australian history, is located around 60 kilometers off the northwest coast of Western Australia. In addition to being the state's largest supplier, the facility produces 15.6 million tons of liquefied natural gas per year to power Asian economies.
Regulators mandated the use of a carbon capture and storage technology, but critics opposed it stating that the injection rate — 1.6 million tons annually — is just one-third of the desired level.
The news coincides with increasing requests from the oil and gas industry for the use of carbon capture to reduce emissions. This is part of a greater transition to renewable energy and decarbonization. For the next 40 years, the system must operate in tandem with the LNG and gas plant to store and minimize emissions.
According to David Fallon, general manager of energy transition at Chevron Australia, pressure in the container had to be reduced as a result of trace oil and gas clogging, which lowers the pace of carbon injection. However, he added that CVX is dedicated to increasing production to 4 million tons annually. The company is sharing its knowledge with others in the Australian mining sector to ensure that the difficulties are not encountered elsewhere.
In order to bring Gorgon back on track, a final investment decision will be taken in the second half of the year on upgrading its carbon capture water handling system. Fallon, however, refused to provide a rough estimate of the cost for the same.
Tim Buckley, head of Climate Energy Finance, claimed that the industry's effort for carbon capture and storage is undermined by the Gorgon run rates. Fallon claimed that the Moomba project that Santos and Beach Energy were developing in South Australia wouldn't face the same challenges.
Zacks Rank & Key Picks
Currently, Chevron carries a Zack Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Sunoco LP SUN, Murphy USA Inc. MUSA and Dril-Quip, Inc. DRQ. While both Sunoco and Murphy USA sport a Zacks Rank #1 (Strong Buy), Dril-Quip carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco, a distributor of motor fuel to approximately 10,000 convenience stores, has a stable business model with sustainable and predictable cash flows. For this year, SUN has witnessed an upward earnings estimate revision in the past seven days.
Murphy USA, a leading retailer of gasoline, operates stations close to Walmart supercenters and sells low-cost, high-volume fuel. MUSA, with more than 1,700 stores, witnessed an upward earnings estimate revision for 2023 and 2024 in the past seven days.
Dril-Quip is a leading provider of highly engineered equipment, service and innovative technologies that are being employed in the energy sector. DRQ’s balance sheet has zero debt, highlighting a sound financial position.
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