Gorgon-Jansz LNG project costs continue to rise

Dec. 10, 2012
Costs for the Chevron Corp.-led Gorgon-Jansz LNG project offshore Western Australia have risen by $9 billion (Aus.) to now stand at an estimated $52 billion (Aus.) for the first three trains.

Costs for the Chevron Corp.-led Gorgon-Jansz LNG project offshore Western Australia have risen by $9 billion (Aus.) to now stand at an estimated $52 billion (Aus.) for the first three trains. In addition, the schedule for first LNG cargo has slipped into 2015.

The new figure is the result of an extensive review of the project during the last 6 months by Chevron as operator.

In 2009 Chevron estimated the project would cost $43 billion (Aus.).

The cost increase and the delay have been blamed on the strengthening Australian dollar, an increase in labor costs, plus productivity issues.

Chevron says the currency impacts and a change in the mix of currencies accounts for one third of the increase in the project’s capital expenditure.

But Chevron Vice-Chairman George Kirkland put on a brave face when making the announcement, insisting that the project economics are still attractive.

“Investment requirements may have grown,” he said, “but oil prices which directly impact the overall revenue stream have increased approximately 80% over the same period.”

Kirkland added that the LNG nameplate capacity has increased by 4% to 15.6 million tonnes/year from the three trains.

At this point the project is 55% complete.

There was no word on the mooted fourth train which Chevron said several months ago would enter front-end engineering and design stages by yearend. Speculation is that the cost increase of the first three trains has set the fourth train on the backburner for the time being.