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Woodside delays Pluto start.

Australian energy firm Woodside Petroleum delayed the planned start-up of its flagship Pluto LNG project by another six months, reported an almost $1 billion cost blowout and trimmed its overall production guidance for the year.

The first LNG shipments from Pluto are now scheduled for March 2012, a year behind the original target, and costs are seen rising by A$900 million to A$14.9 billion ($15.7 billion) as a design fault and weather-related issues delayed the project, Woodside said.

The delay comes at a time when gas firms worldwide are racing to develop LNG projects and capture a wave of demand from Asia and Australian LNG projects are facing rising labour costs and inflation.

"The history of these projects are that they always take longer and they cost more than project proponents have hoped ... there's no question that the cost of LNG projects constructed in Australia is high, it just goes with the territory," Geoff Barker, a partner at Resource Investment Strategy Consultants (RISC Pty Ltd), said.

The difficult environment and remote locations of many of the Australian LNG projects and some productivity issues may influence the ability to bring projects on time, Barker said.

The 4.3 million tonne per annum (mtpa) Pluto project, developing gas fields offshore of the northwest Australian coast, was previously scheduled to produce its first LNG cargo in September, which was a delay from an original target of March. Woodside blamed a design flaw and labour shortages for some of the previous delay.

Woodside shares fell almost 4 per cent after news of the latest delay in their sharpest daily fall in seven months. Analysts said the repeated delays might foreshadow some of the challenges ahead for the A$200 billion worth of proposed LNG projects in the pipeline in the country.

There are currently plans to double Australia's LNG production from around 20 mtpa currently to 40 mtpa online by 2015, although analysts are skeptical due to a history of delays and cost overruns like Pluto's.

Woodside started building Pluto at a time when Australia had essentially no LNG projects underway and there was no direct competition for resources.

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Publication:Oil & Gas News
Geographic Code:8AUST
Date:Jun 27, 2011
Words:379
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