Yolla project suffers another major cost increase

Phase 1 of the BassGas midlife enhancement project at Yolla natural gas field in the Tasmanian Bass basin has suffered the second major cost blow-out and construction delay in a few months.

Operator Origin Energy Ltd. says the first phase work will now cost $490 million (Aus.), up from the revised estimate of $460 million (Aus.) reported in April.

There also will be a 3-4 month addition to the construction time.

AWE, one of the other joint venture members, estimates even higher costs, saying the project could now cost as much as $550-580 million (Aus.). The original budget at financial investment decision was $360 million (Aus.).

The cost review last April was blamed on unique offshore construction challenges. The latest increase is due to a weather-related unsuccessful lift of the compression module on the Yolla platform, which means the immediate plan will be altered to return production to a free-flow state.

There will also be added costs associated with another attempt to install the compression module—now timed for yearend, when weather should be calmer in the southern hemisphere summer.

Phase 1 of the project involves changing the unmanned Yolla platform to a manned platform by adding accommodation, along with the compression and associated safety features.

This work was scheduled for completion by the end of June with gas production resuming this month. Now it is unlikely to resume (under free-flow mode) until the end of September.

Stage 2 of the project involves drilling Yollas 5 and 6 production wells, now scheduled for December 2013 through February 2014.

The Midlife Enhancement is designed to improve operational efficiencies of the BassGas project, which delivers gas by pipeline to an onshore processing plant in eastern Victoria and to ensure accessibility of the remaining field reserves.

Origin has 42.5% and operatorship, AWE has 46.25%, and Toyota Tsusho Gas has 11.25%.

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