Sydney (Platts)--13Nov2012/525 am EST/1025 GMT
Further cost blow-outs are being tipped for the three eastern Australia coalseam gas-to-LNG projects, all of which are already over budget, following news of a $3.3 billion increase in capital spending at the ExxonMobil-led Papua New Guinea LNG project. Rising costs and the stronger Australian dollar have this year affected forecast capital spending at all three LNG projects being built on Curtis Island in Gladstone, led by BG Group, Santos and Australia Pacific LNG respectively. Similar issues were behind Monday's announcement that the budget for the ExxonMobil-led PNG LNG project had risen from $15.7 billion to $19 billion, although that news was softened by a 5% increase in the plant's capacity to 6.9 million mt/year. The budget for BG's 8.5 million mt/year Queensland Curtis LNG project rose from $15 billion to $20.4 billion, and upstream operator Origin Energy conceded that the A$23 billion ($24 billion), 9 million mt/year Australia Pacific LNG joint venture had also been affected by exchange rate movements. Santos meanwhile was forced to bring forward $2.5 billion in development spending at its 7.8 million mt/year Gladstone LNG project, taking the joint venture's initial outlay from $16 billion to $18.5 billion. Article continues below...Request a free trial of: LNG DailyLNG Daily is essential reading as LNG supply dynamics continue to change in big markets like Japan, China, India and the U.S. This premier independent news publication for the global LNG industry gives readers information on every aspect of the global market from new LNG supply projects to gas quality issues.
Further cost blow-outs are being tipped for the three eastern Australia coalseam gas-to-LNG projects, all of which are already over budget, following news of a $3.3 billion increase in capital spending at the ExxonMobil-led Papua New Guinea LNG project. Rising costs and the stronger Australian dollar have this year affected forecast capital spending at all three LNG projects being built on Curtis Island in Gladstone, led by BG Group, Santos and Australia Pacific LNG respectively. Similar issues were behind Monday's announcement that the budget for the ExxonMobil-led PNG LNG project had risen from $15.7 billion to $19 billion, although that news was softened by a 5% increase in the plant's capacity to 6.9 million mt/year. The budget for BG's 8.5 million mt/year Queensland Curtis LNG project rose from $15 billion to $20.4 billion, and upstream operator Origin Energy conceded that the A$23 billion ($24 billion), 9 million mt/year Australia Pacific LNG joint venture had also been affected by exchange rate movements. Santos meanwhile was forced to bring forward $2.5 billion in development spending at its 7.8 million mt/year Gladstone LNG project, taking the joint venture's initial outlay from $16 billion to $18.5 billion.
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LNG Daily is essential reading as LNG supply dynamics continue to change in big markets like Japan, China, India and the U.S. This premier independent news publication for the global LNG industry gives readers information on every aspect of the global market from new LNG supply projects to gas quality issues.
"Further upward cost revisions seem highly likely on all those projects following this announcement [about the PNG LNG blow-out]," Hong Kong-based Bernstein Research analyst Neil Beveridge said in a note Tuesday. "Cost blow-outs and project delays are endemic to all Australian oil, gas and mining projects," Beveridge said. "With a shortage of skilled labor and high infrastructure costs for greenfield developments, project capex overruns are the rule rather than the exception in the LNG industry." Beveridge added that Bernstein's analysis of global LNG projects over the past 10 years had indicated that they typically overrun on cost by 30% from the estimate at final investment decision and start up 12-15 months later than scheduled. The increase in capex at PNG LNG was not a surprise, but the magnitude of the increase was, at 27% over the estimate at FID, the analyst said. "While the start date of 2014 has been maintained, higher costs must reflect some schedule slippage, and we would expect start-up towards the latter half of 2014," Beveridge said. "Despite these cost increases, PNG LNG at $2,300/mt remains cheaper than other LNG projects in the region...While that is much higher than the cost per mt budgeted at FID, it is still significantly lower than other similar projects in the region which are as high as close to $4,000/mt."--Christine Forster, christine_forster@platts.com--Edited by Robert DiNardo, robert_dinardo@platts.com
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