Wheatstone cost tops $US34 billion amid construction difficulties

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The cost of Chevron’s Wheatstone natural gas project in WA has blown out.Chevron has suffered a significant cost blow-out at the massive Wheatstone gas export project off western Australia at the same time as partners in one of Queensland’s projects, APLNG, has confirmed it may not reach full capacity for another six months due to gas supply constraints.
Nanjing Night Net

Addressing analysts after the release of its latest results at the weekend, Chevron said the giant Wheatstone project would now cost $US34 billion ($45 billion) to complete, significantly more than the most recent estimate of a $US29 billion development cost.

Partners in the project include Woodside, which has a 13 per cent stake.

Even though the resources boom has cooled Chevron cited the overheated construction market at the time work commenced for part of the cost blow-out, along with difficulties in having key items of equipment built offshore.

“Late module delivery … was one of the primary drivers behind the cost increase,” the oil major’s chief financial officer Patricia Yarrington told analysts, “due to poor performance at one of the fabricating yards … The contractor was unable to effectively manage the size and the scale of the work scope.”

Chevron also blamed the fact that it failed to estimate the quantity of materials needed for the project, since it took the decision to proceed with the project when only 15 per cent of the engineering had been done “and so the rest was based on rules of thumb,” Ms Yarrington said.

Despite the delays with Wheatstone, the other gas export project it and Woodside have just brought on stream, the first unit of the Gorgon project, has been generating liquefied natural gas at a stable 110,000 barrels a day, or around 5 million tons a year, the group said, along with 6700 barrels a day of condensate.

Production of the second unit at Gorgon is now ramping up, it said, with two to three export shipments of gas a week anticipated, it said. Initial output from the third unit at this project is expected by mid-2017, while the first production from Wheatstone is expected around the same time.

Gorgon will have the capacity to export 15.6 million tonnes of gas annually and Wheatstone 8.9 million tonnes.

​Separately, ConocoPhillips, which has a 37.5 per cent stake in Queensland’s Australia Pacific LNG gas export project, the same share as Origin Energy, said it may not be until May 2017 before the project reaches full capacity. The first unit is now running around 10 per cent above rated capacity and it has begun raising throughput at the second production unit.

“We’re focused on the upstream side, on ramping our gas supply to be able to run both trains at full capacity,” the US group’s head of production, drilling and projects, Al Hirshberg​, told analysts.

“We’re not at that point yet. I expect it will be sometime in the second quarter before we have enough gas supply from the upstream side to be able to run both trains at full tilt. And that’s when we’ll be looking to do our Train 2 lenders’ test. We’ve completed the lenders’ test on Train 1. Train 2, tentatively thinking around May or so that we’d be in a position to run that test.

“Just to give you an idea, year-to-date, we’ve now shipped over 50 cargoes from APLNG.”

This story Administrator ready to work first appeared on Nanjing Night Net.