Apache Corporation announced that an Apache Australian subsidiary and its partners will proceed with development of the Chevron-operated Wheatstone LNG (liquefied natural gas) Project in Western Australia.

The first phase of the project will comprise two LNG processing trains with a combined capacity of approximately 8.9 million tonnes per annum (Mtpa), a domestic gas plant and associated onshore and offshore infrastructure.

Apache will supply gas to Wheatstone from its Julimar and Brunello natural gas fields, Carnarvon Basin discoveries made in 2007. Expected investment, net to Apache, for the field and LNG facility development, including drilling, transportation, and other infrastructure, is approximately $4 billion, which will be spread over five years. First production is planned for 2016.

The Wheatstone Project is a joint venture between the Australian subsidiaries of Chevron (operator, 73.6%), Apache (13.0%), Kuwait Foreign Petroleum Exploration Company (KUFPEC), (7.0%) and Shell (6.4%). Apache, Chevron, and KUFPEC have signed long-term LNG sales-and-purchase agreements with Tokyo Electric Power and Kyushu Electric Power Company, Inc.

"Wheatstone is an important step for Apache in monetizing our natural gas discoveries off the coast of Western Australia," said G. Steven Farris, Chairman of the Board and Chief Executive Officer for Apache. "This is a long term, legacy asset. Apache will realize value over more than 20 years from its Julimar and Brunello gas discoveries, which combined have estimated recoverable gas in excess of 2.1 trillion cubic feet.

"Wheatstone also represents Apache's first project in the growing worldwide market for LNG, providing an additional pathway for premium pricing of our gas resources offshore Australia," Farris said. "It's also scalable, allowing for development of any future discoveries in the Carnarvon Basin, where we hold interests in several prospective blocks."

Apache Julimar Pty Ltd and KUFPEC Australia (Julimar) Pty Ltd, a subsidiary of Kuwait Foreign Petroleum Co., will develop facilities to supply gas from their Julimar and Brunello discoveries (the Julimar Development Project) to the Wheatstone Project. Apache has a 65 percent interest in the Julimar Development Project and is the operator of the project.

The Julimar Development Project is expected to generate average net sales to Apache of approximately 140 million cubic feet per day (MMcfd) of LNG (equivalent to 1.07 Mtpa) at prices pegged to world oil markets, 22 MMcfd of sales gas into the domestic market, and 3,250 barrels of condensate per day. During second quarter 2011, Apache's Australian production averaged approximately 180 MMcf and 40,000 barrels of oil per day.