Chevron (CVX.US) explores alternative hedging for Middle East supply disruptions: targets Argentina and the Mediterranean to drive global LNG growth, seeks deal with India

According to Zhitong Finance APP, Chevron (CVX.US) Global Head of Natural Gas, Freeman Shaheen, stated that amid rising energy security concerns among buyers due to the Middle East crisis and growing demand, Chevron is seeking to expand its global natural gas asset portfolio, stretching from Argentina to the Mediterranean. Over the last four years, the global natural gas market has experienced two major disruptions: the 2022 Ukraine war, which cut off supply from top producer Russia, and this year’s Iran conflict, which cut off supply from Qatar and drove up LNG (liquefied natural gas) prices.

"What we have seen from this crisis is that it reinforces the need for diversification—diversified supply sources and diversified contract structures," Shaheen said. He added, buyers should not "expose themselves to risk in the spot market—the liquidity of the LNG spot market is nowhere near that of crude oil and refined products."

20 Million Tons of Capacity Portfolio and Four Major Expansion Directions

Chevron currently has around 20 million tons per year of LNG supply capacity, including about 16 million tons from its project net gas output, as well as 4 million tons contracted from the US Gulf Coast since February this year—these volumes will be gradually ramped up in coming years according to the agreements.

"We want to continue growing this portfolio," Shaheen said in an interview during the Gastech conference in Bangkok.

"Argentina's oil and gas development has very promising prospects. The eastern Mediterranean is also a very exciting area for us," he said. He is also optimistic about further opportunities in Australia and Africa, as long as projects offer suitable capital, fiscal, and regulatory conditions, noting that the Iran war underscores the need for a diversified gas portfolio.

Shaheen did not specify exact locations in Africa, Australia, or the eastern Mediterranean where the company might expand. In June this year, Chevron was approved as operator for an offshore block in Greece, taking a leading role in gas exploration and expanding its presence in the region.

Venezuela: Over $7 Billion Capital Prioritization Question

However, these opportunities must be balanced with Venezuela investment plans—Chevron and its partners plan to invest over $7 billion in Venezuela to more than double oil output by 2031.

"I've always been told there will be massive capital allocation in Venezuela," Shaheen told Reuters, "All projects will be put into our project pipeline for analysis and then prioritized."

Asia Headquarters and Shifts in Buyer Behavior

Chevron already has a major presence in Australia, operating the country’s largest LNG project Gorgon and the Wheatstone project, with much of its Australian supply going to Japan. "Japan remains our base, and we have good structural opportunities in Singapore," Shaheen said, adding that China and South Korea continue to be attractive markets. For 2024, Chevron signed an agreement with Singapore’s Sembcorp Industries to supply up to 600,000 tons of LNG per year starting from 2028.

He noted LNG buyers’ procurement habits are changing too: importers with national backgrounds are increasingly willing to sign directly with portfolio suppliers rather than relying on intergovernmental agreements.

India: Price-Sensitive, but "Huge Opportunity"

"I would really like to strike a deal in India. They're just very, very sensitive to headline prices," Shaheen said. "I think India is still growing. Over time, there will be huge opportunities there."

Background: Iran War Reshapes Global Gas Market

The "Iran conflict" Shaheen refers to is the war that broke out on March 2nd this year. After an Iranian military strike hit Qatar’s export network, QatarEnergy shut down Ras Laffan, the world’s largest LNG facility. European gas prices briefly jumped nearly 50%. Qatar supplies about one-fifth of the world’s LNG, and at one point exports fell approximately 96% compared to pre-war levels; it is estimated that in six months Qatar’s cumulative loss was about $24 billion, and full restoration of operations may take up to five years.

In terms of prices, the Asian spot benchmark JKM broke through $25 per MMBtu at the conflict's peak (a new high since 2022). European storage levels continued to fall; according to reports, the overall European fill rate was only about 60%, a record low for the same period, with Germany at just 50%.

Institutions are cautious on the market outlook. A September 10 Goldman Sachs report noted that recent Persian Gulf LNG exports were just 15%-25% of pre-war normal levels. Goldman raised its Q4 TTF price forecast from 53 euros/MWh to 70 euros, and its JKM forecast from $18.90 to $24.85. In the extreme scenario of the Strait of Hormuz’s winter flows at only 25% of normal, TTF could spike to 105 euros, and JKM to around $35. However, the bank also cautions the long-term logic is the opposite: due to massive new US LNG export projects, Goldman cut its 2030-2035 TTF forecast to 19 euros/MWh.

Tight supply is also reshaping trade flows. After European TTF surpassed Asian JKM and prices inverted, the proportion of US Gulf Coast LNG exports going to Europe rose from about 55% in June–July to over 65% in August; high prices simultaneously caused demand destruction, and China’s August LNG imports are projected to fall about 18% year-on-year.

Chevron’s Argentina Bets: Two Commitments Exceeding $16 Billion

Shaheen’s optimism about Argentina is rooted in Chevron’s two large investments there. According to reports, Chevron is about to finalize a $3 billion NGL (natural gas liquids) processing joint venture supply agreement with Argentina’s state oil company YPF and private producer Pluspetrol, with pipeline operator TGS leading Vaca Muerta shale gas processing capacity development. Meanwhile, Chevron has reportedly submitted a $13.8 billion oil development application under Argentina’s Major Investment Incentive Program (RIGI). These two commitments total over $16 billion. Vaca Muerta is one of the largest shale oil and gas fields outside North America and is becoming Argentina’s key area for boosting oil and gas output and exports.