Aug. 12 (Bloomberg) -- Chevron Corp. said its Gorgon liquefied natural gas venture in Western Australia will bring forward plans to build a plant to supply fuel to the local market and help prevent energy shortages in the state.

The partners, including Royal Dutch Shell Plc and Exxon Mobil Corp., will assess whether to construct the plant at the same time as deciding on the LNG export project, Colin Beckett, manager for the Greater Gorgon area at San Ramon, California- based Chevron, said today. They hope to get all approvals within the next year, to be followed by an investment decision, he said.

Western Australia, which generates a third of the nation's exports, has experienced an energy shortage since a June 3 explosion at Apache Corp.'s Varanus Island plant that supplies about 30 percent of the state's gas. The disruption has boosted gas prices and left mining companies and businesses scrambling to secure alternative fuels to prevent shutting down operations.

``The Western Australian domestic market has been very tight even without the Varanus Island shutdown,'' said Graeme Bethune, chief executive of Adelaide-based consulting firm EnergyQuest.

The gas plant would have a capacity of 300 terajoules a day, compared with the existing Western Australian market of about 1,150 terajoules a day, Beckett said in a telephone interview. He declined to estimate the cost of the plant, which would be built on the Barrow Island nature reserve within the site of the LNG project. The whole Gorgon project may cost A$20 billion ($17.5 billion), the Western Australian government said.

`More Buoyant'

``Certainly the domestic gas market in Western Australia is more buoyant from a supply point of view than it has been,'' Perth-based Beckett said. ``This does start to provide some certainty for the market that there will be another supply, another infrastructure link to the coast.''

The proposed plant will boost Western Australia's gas supply by 30 percent, Western Australian State Development Minister Eric Ripper said, describing the decision as ``a massive boost for our state's energy security.'' The Gorgon project still requires final government approvals after the partners expanded the capacity of the proposed plant by 50 percent late last year.

The Gorgon partners approved A$1 billion of funding to finance the work on the project that will take place before the final decision to proceed, Beckett said. That will allow the venture to invite bids for A$300 million of contracts, to be followed over the next five months by tenders for contracts for ``several billions of dollars'' that will be awarded once the project gets final approval, he said.

Reindeer, Macedon

The LNG venture will comprise three production units of 5 million metric tons a year each. The local gas plant will start up at the same time as the third LNG production unit, which will be about 12 months after the first two start, Beckett said.

The project will boost the net present value of Australia's gross domestic product by A$64.3 billion and provide government revenue of about A$39.8 billion, Beckett said today in an e- mailed address, citing a study by economic consulting firm ACIL Tasman Pty.

More than 90 percent of Western Australia's natural gas supplies are usually provided from the North West Shelf venture's Karratha plant and Apache's Varanus Island plant. Houston-based Apache and partner Santos Ltd. are developing the offshore Reindeer gas field and the onshore Devil Creek processing plant to add a third major supply source for the state, to start up in 2010. BHP Billiton Ltd. and partner Apache are also considering developing the offshore Macedon field for local buyers.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net.

Last Updated: August 12, 2008 06:09 EDT