2nd UPDATE: Kogas Inks Pact With Chevron For LNG From Gorgon

Chevron Corp. (CVX) has signed a tentative agreement with Korea Gas Corp. (036460.SE) for the delivery of 1.5 million metric tons for 15 years from its Gorgon Project in Western Australia, the largest long-term LNG contract between Australia and South Korea, the company said Tuesday.

As part of the arrangement, Chevron and Kogas have an option to extend the agreement for a further five years, the U.S. oil giant said in a press release. The companies are also discussing LNG sales and an equity purchase from Chevron's Wheatstone project, to be located in the western Pilbara region about 200 kilometers south of the Wheatstone natural gas field. Australia's Minister for Resources made a similar announcement early Tuesday.

Kogas couldn't immediately be reached for comment.

"The sale of Gorgon LNG to Korea reflects Australia's growing reputation as an LNG supplier," said Chevron Australia Managing Director Roy Krzywosinski. "We expect to build on this relationship with Kogas as we move forward with our Australian LNG projects."

According to Chevron, the agreement represents the largest, long-term LNG sale between Australia and South Korea, and the first long term sale between Kongas and an Australian supplier.

South Korea is the world's second-largest importer of LNG and Kogas is the world's biggest single buyer of the fuel.

The agreement comes a day after Chevron said the Gorgon LNG project in Western Australia will cost A$43 billion. Chevron, which owns a 50% stake in the project, said Monday that works will begin immediately and that it and its partners, Exxon Mobil Corp. (XOM) and Royal Dutch Shell PLC (RDSB.LN), with a 25% holding each, are still aiming to ship first gas by 2014.

Chevron last week said it signed three binding sales agreements to supply nearly 3 million metric tons a year of LNG from Gorgon to Japanese and South Korean energy companies.

Subject to Australian foreign investment approval, the Japanese companies, Osaka Gas and Tokyo Gas, will also acquire 1.25% and 1% interests in the project respectively.

Exxon Mobil last month struck two deals over Gorgon LNG, including a 20-year deal with PetroChina Co., the listed unit of China National Petroleum Corp., and a 20-year agreement with Petronet LNG Ltd., India's largest LNG importer.

Shell last year agreed to sell LNG from its share of Gorgon to PetroChina.

-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207.

-The Sydney Bureau contributed to this article