NWS expansion blows the budget

CAPITAL costs for the North West Shelf Venture’s Phase 5 expansion have blown out 21% to more than $A2.425 billion, operator Woodside Energy reported yesterday.
NWS expansion blows the budget NWS expansion blows the budget NWS expansion blows the budget NWS expansion blows the budget NWS expansion blows the budget

In a statement to the Australian Stock Exchange, Woodside said the joint venture, which includes BHP Billiton, Chevron and Shell, approved the $425 million budget increase following a comprehensive review.

Woodside blamed the revision on “higher labour costs in construction contracts awarded during a period of extraordinary international construction market inflation”.

Addressing the Asia-Pacific Economic Cooperation Gas Forum (APGAS) last Thursday, Voelte said labour costs continued to escalate dramatically, with the average hourly labour rate paid to Train 5 workers now 50% higher than the company’s 2004 estimates. At the same time, the profit margin being pocketed by contractors had also risen by 50%, he said.

Despite the cost increase, Woodside said the current expansion phase remains on schedule for completion in 2008.

Adding the 4.2 million tonne (MMt) a year Phase 5 liquefied natural gas train at Karratha will increase production capacity 25% to about 16MMt, making the facility one of the largest in South-East Asia and adding $1 billion to Western Australia’s yearly exports.

Components of Phase 5 include the processing train, an acid gas removal unit with a single absorber, jetty spur and second loading berth, turning basin and approach channel, and two power generators. A demineralisation water tank, boil-off gas compressor and a fuel gas compressor will also be built.

Meanwhile, there is still no word about when the fourth LNG train will resume production. The 4.2MMtpa facility was shut down late last month for the third time since its commissioning two years ago.

The shutdown was initially scheduled for early September but was brought forward in order to minimise disruptions to LNG cargoes.

Repairs will be undertaken on the same mixed refrigerant compressor that caused a 30-day shutdown last August. Another shutdown, of 20 days, occurred in February last year when the main cryogenic heat exchanger had to be repaired.

The six equal participants in the NWS Venture are Woodside Energy (operator); BHPB (North West Shelf); BP Developments Australia; Chevron Australia; Japan Australia LNG (MIMI) and Shell Development (Australia).