Chevron Corp. (CVX) said Thursday it has awarded engineering contracts for a deepwater natural gas project that will be its biggest single investment in Indonesia and increase its exposure to booming demand in North Asia for cleaner-burning fuels.

The move shows how Big Oil's appetite for deepwater oil and gas production remains strong, despite the major oil spill at the BP PLC-operated Macondo well in the Gulf of Mexico this year. Chevron said the Gendalo-Gehem project will tap gas fields beneath six thousand feet of water in the Makassar Strait offshore East Kalimantan province.

Separately, Chevron has agreed to sell an 18% stake in the Gendalo-Gehem project to China Petrochemical Corp., known as Sinopec. The agreement, signed in Singapore on Nov. 30, is conditional on regulatory approvals in Indonesia and China .

Chevron said Gendalo-Gehem will likely produce around 1.1 billion cubic feet of natural gas and 31,000 barrels of condensate-a petroleum liquid-a day at its peak from four fields.

Around 75% of the gas from the project would be converted to liquefied natural gas at state-owned PT Pertamina's existing Bontang LNG plant in East Kalimantan for export, with the remaining output sold to the domestic market, said Stephen Green, Chevron's managing director in Indonesia and the Philippines .

Chevron earlier pegged the cost of the Gendalo-Gehem project at between $6 billion and $8 billion in a development plan submitted to the Indonesian government. This would dwarf its previous investments in the country, which are concentrated in production of crude oil and geothermal energy.

The engineering work will allow Chevron to "narrow that band" as well as the timetable for the project to begin operations, Green told Dow Jones Newswires in an interview.

Chevron said it has awarded contracts for the engineering and design of Gendalo-Gehem's key infrastructure, including pipelines and floating production units, to France 's Technip S.A. (TEC.FR), Australia 's WorleyParsons Ltd. (WOR.AU) and Indonesia 's PT Singgar Mulia.

Chevron is accelerating the development of Asian natural-gas projects such as Gendalo-Gehem to gain exposure to developing economies such as China and India , which want to lower their dependence on coal and crude oil.

Bringing in Sinopec as a partner will help Chevron get more access to China 's energy sector. Sinopec, which declined to comment on the deal, is China 's second-largest oil and gas producer by capacity after China National Petroleum Corp. and is building several LNG receiving terminals on China 's eastern coast.

The International Energy Agency predicts China 's gas consumption will more than quadruple between 2008 and 2035. Much of this demand will be met by overseas projects-the IEA forecasts China's annual natural-gas imports will grow from just 176 billion cubic feet in 2008 to more than seven trillion cubic feet in 2035, accounting for 40% of the growth in global trade.

Over the past year, Chevron has begun construction of the A$43 billion Gorgon gas development in Australia and signed several gas sales deals for another large LNG project in the country, Wheatstone. It is also pushing ahead with the $3.1 billion Platong Gas II project in the Gulf of Thailand .

Of Chevron's more than 150 trillion cubic feet of natural gas reserves globally, Green said nearly half was in the Asian-Pacific region.

Projects like Gendalo-Gehem are helping to restore Indonesia 's status as a major oil and gas producer after the country suspended its membership in the Organization of Petroleum Exporting Countries.

Indonesia 's problems reflect supply failing to keep up with demand in recent years, as fields age and little new investment arrives. Around 90% of Indonesia 's oil fields are mature.

Compounding matters are tax and regulatory changes that have affected the ability of investors in oil and gas projects like Chevron to recover their costs.

Green said one of Chevron's challenges will be making the Indonesian government and approvals agencies comfortable with the scale of the Gendalo-Gehem project, the magnitude of the investment, and the length of time it will take for it to deliver revenue.

First gas production isn't likely before the second half of the decade. Engineering and design work will take around two years before Chevron will decide whether to start building the project. Construction will last several years, although the timetable won't be as long as some of Chevron's other big gas projects in the region, like Gorgon, as Gendalo-Gehem will use existing infrastructure, such as onshore pipelines and the Bontang LNG terminal.

The Indonesian government has also sought reassurance on the safety of producing natural gas and liquids at vast depths offshore, given the Macondo well disaster in the Gulf of Mexico , he said.

"We believe that our approach to deepwater is sound and that we can successfully complete and operate this project, along with many others worldwide, with due respect to the environmental and safety concerns," Green said.

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