2nd UPDATE: Australia Clears Way For Final Gorgon Decision

Australia's federal and Western Australia state governments Tuesday jointly approved, as expected, five production licenses for the giant Gorgon gas project, clearing the way for a final investment decision by the project's joint venture partners.

The granting of the production licenses removes the final regulatory hurdle ahead of a decision by the three Gorgon partners, ExxonMobil Corp. (XOM), Chevron Corp. (CVX) and Royal Dutch Shell PLC. (RDSB.LN), on whether to proceed.

Roy Krzywosinski, managing director of Chevron's Australian unit, said it was "just a matter of weeks" before the partners will be in a position to make a final investment decision.

News of the license and retention lease approvals "takes us one more step closer to project sanction," Krzywosinski told reporters. From here, the partners need to get internal approvals and finalize the development proposals, he said.

If it goes ahead, the Gorgon development - which the government estimates will cost around A$50 billion to build and produce LNG exports worth around A$300 billion - would be the largest single investment in Australia.

"These production licenses, which cover the enormous Io-Jansz and Gorgon fields, will give the joint venture surety as it works towards finalizing the finance for this remarkable project," Western Australia Mines and Petroleum Minister Norman Moore said in a statement.

The project has gained significant momentum in recent times, with the joint venture partners signing a number of offtake agreements with buyers in key markets including Japan, China and India.

Exxon last month struck two deals over Gorgon LNG, including a 20-year deal with PetroChina Co. (PTR), the listed unit of China National Petroleum Corp., to buy 2.25 million metric tons of LNG a year, and a 20-year agreement with Petronet LNG Ltd. (532522.BY), India's largest LNG importer, for 1.5 million tons.

The offering of production licenses was seen as a formality following federal environmental approval last week.

Federal Environment Minister Peter Garrett gave an expansion of the project the green light, with a number of conditions to protect, manage and monitor protected animals at the project site which the companies are widely expected to meet.

And, in a move that removed a potential barrier to the project, the federal and West Australia state government agreed in August to assume joint responsibility for any future claims arising from any problems with the projects plan to capture and store greenhouse-gas emissions underground.

Federal and state authorities also offered Tuesday to renew seven retention leases over other gas fields in the greater Gorgon area, on the condition that development of these fields is "timely".

In particular, regulators will require a mid-term review of the West Tryal Rocks gas field in two years, Prime Minister Kevin Rudd said in a statement.

The fields will be developed sequentially to maintain production and extend the economic life of the project, Rudd said.

They will also be used to increase the supply of domestic gas into the Western Australian market, providing greater competition. Gorgon will deliver at least 150 TJ/day of domestic gas into the Western Australian market by no later than 2015, Rudd said.

The final regulatory clearance comes as the federal government earlier Tuesday said it plans to set up a new resource sector employment taskforce to help secure the skilled workers needed to build and operate a string of major resource projects slated for development over the next decade.

"The Gorgon project is just one of around 80 planned or approved projects nationally that are likely to see demand for skilled resource sector labor increase by 70% over the next decade," Rudd said.

If all of these projects proceed, there could be an additional 70,000 peak construction jobs and 16,000 ongoing positions generated by 2020.

The new taskforce will examine the current pipeline of skilled construction workers such as engineers, boilermakers, welders, concreters, riggers, drillers and divers that will be needed and the areas where additional skills focus will be required.

-By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; [e-mail]

(Ross Kelly in Sydney contributed to this story)