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Bloomberg: Cost Gains Threaten Australian LNG Growth, Group Says (Update1)

By Angela Macdonald-Smith

May 31 (Bloomberg) — Construction cost increases are threatening Australia’s targeted expansion in liquefied natural gas supply, said Belinda Robinson, chief executive officer of the Australian Petroleum Production and Exploration Association.

The country’s aim to quadruple LNG output by 2017 is “becoming more obviously challenging” than 18 months ago when the goal was set, Robinson said today at the South East Asia Australia Offshore Conference in Darwin.

Australia has more than A$50 billion ($41 billion) of proposed LNG projects in northern and Western Australia led by companies including Woodside Petroleum Ltd., Chevron Corp. and Inpex Holdings Inc. Chevron, the second-biggest U.S. oil company, and partners in the Gorgon LNG venture last year dropped a 2006 deadline for approving the more-than $10 billion project for development and are working to improve its economics.

“Soaring project costs related to tightness in the supply of construction materials, equipment, services, and limitations on the availability of a skilled workforce have constrained project growth,” Australian Industry Minister Ian Macfarlane said at the conference. “Not only does this have an impact on project returns but the scarcity of resources has the potential to delay some projects and increase supply timing risks.”

Royal Dutch Shell Plc and Exxon Mobil Corp. have stakes in the Gorgon venture.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: May 31, 2007 00:49 EDT

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