2nd UPDATE: Woodside Evaluating Cost, Schedule Of Pluto LNG
October 21 2010 - 10:13PM
Dow Jones News
Woodside Petroleum Ltd. (WPL.AU) said Friday that it is
evaluating the cost and schedule of the A$13 billion foundation
stage of its Pluto liquefied natural gas project after it
discovered parts of the development might not be cyclone-proof.
Tapping fields containing 5 trillion cubic feet of natural gas
offshore Western Australia state, Pluto is Woodside's most
important development project.
Not only will related sales to Asian utilities boost Woodside's
revenue considerably, it is one of few LNG developments to come on
line globally in 2011.
A March, 2011 first LNG target date was notably absent from
Woodside's third quarter update Friday. "A comprehensive periodic
cost and schedule evaluation is underway; the results of which will
be available in November," Woodside said.
It is not clear whether Woodside will be pushing back completion
of the project it said was 94% finished as at the end of September.
Externally sourced back-up LNG supplies are available to meet
scheduled customer deliveries in the event of a delay, the company
said earlier this year.
Construction of Pluto has been dogged by industrial action from
construction workers over their accommodation arrangements and
crane drivers over pay, as Australia's resource-driven economy
continues to run hot. Woodside in November hiked its cost estimate
for Pluto by 6%-10% after experiencing a shortage of skilled
workers.
It said Friday that all key heavy lifts were completed at the
onshore Pluto site in August and LNG storage tanks are
complete.
But the Perth-based company said that the design of some onshore
flare towers doesn't comply with its own wind loading
specifications. "Some sections of the flare towers are being
dismantled in preparation for the approaching cyclone season and
corrective action," Woodside said.
A spokesman for the company told Dow Jones Newswires that
Woodside has conducted reviews on Pluto's cost and timing about
every six months since a final investment decision was made on the
project in 2007.
"With the timing of the report so close, it made sense to wait
for the review to be completed before providing an update on those
matters," the spokesman said, adding that Pluto is still targeting
first LNG in March.
Still, the spokesman said Woodside doesn't yet know if work on
the flare towers will materially impact the project's timing and
cost estimates.
Woodside wants to build another two LNG projects -- Browse and
Sunrise -- to meet a projected surge in demand for cleaner-burning
fuels from Asia. It also wants to double, then triple, Pluto's
size.
It said Friday that onshore front-end engineering and design
studies for an expansion of Pluto to two, then three production
units are complete. The company, however, needs to discover more
gas, or source it from third parties, before it can sign off on the
expansion by a 2011 target.
A new exploration well, Moyet-1, commenced drilling on Sept. 6
but only the top section of the hole was drilled due a need for the
rig to go elsewhere, Woodside said. It will revisit Moyet-1 and
plans to drill Remy-1 in the current quarter.
Australia's second-biggest oil company behind BHP Billiton Ltd.
(BHP.AU) reported an expected 11% fall in production to 18.3
million barrels of oil equivalent for the three months to Sept. 30
compared with the previous corresponding period. It reiterated
annual production guidance of 70 million-75 million BOE.
Third quarter revenue rose 15% to A$1.03 billion from A$897
million amid higher prices for oil and LNG.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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