INTERVIEW: Bechtel Expects To Mitigate LNG Project Cost Pressures
08 December 2011 - 4:40PM
Dow Jones News
Bechtel Group is confident the three gas-export projects worth
over US$50 billion that it's building for international oil
companies in Australia's Queensland state can be delivered on time
and budget, a senior executive said Thursday.
Richard McIlhattan, Bechtel's general manager for the global LNG
business, said cost and time schedules remained in place despite a
tighteing of Australia's labor market driven by the huge scale of
investments in energy and mining projects.
The three Queensland projects intend to ship liquefied natural
gas to Asian customers by 2014 and 2015. Bechtel has also been
contracted by Chevron Corp. (CVX) to build the US$29 billion
Wheatstone LNG project in Western Australia state.
Many analysts warn that Australia's booming mining sector will
crimp the supply of labor and push up costs, potentially throwing
the developments off course. Woodside Petroleum Ltd. (WPL.AU) this
year announced a third cost blowout and delay to its A$14.9 million
Pluto LNG project in Western Australia, partly blaming a shortage
of welders, pipe fitters and other tradespeople.
"Bechtel only takes on work that it believes it can complete on
time, within budget, to quality, and safely," McIlhattan told Dow
Jones Newswires. "Customers come to us for certainty of outcome.
All of our previous LNG projects have been delivered on time and on
budget, this includes our last project here in Australia: the
Darwin LNG plant for ConocoPhillips (COP)."
McIlhattan said cost pressures are being mitigated by
experienced project management teams and that extensive planning
has been conducted through the early engineering and design
processes.
"This enables us to ensure the projects will be successfully
executed," he said.
A labor shortage means that more delays and cost blowouts at
Australian projects are clearly possible, Noel Tomnay, the head of
global gas at UK-based energy consultancy Wood Mackenzie said
Wednesday. "But we also recognize that there's an opportunity
because everyone's so aware of the risk now," Tomnay said.
Bechtel recently announced a new program in Australia to train
400 adult-aged apprentices to work on various gas projects. Two
universities in Queensland this week established study centers for
unconventional gas production, assisted partly by funding from the
state government.
Energy companies often include buffers in their schedule and
cost estimates to absorb unexpected delays. Santos Ltd. (STO.AU)
Chief Executive David Knox says the $16 billion estimate for its
LNG joint venture in Queensland is "conservative" and includes
contingencies.
Managers of all three projects--being built by Santos and
partners including Total SA (TOT); ConocoPhillips (COP), Origin
Energy Ltd. (ORG.AU) and China Petrochemical Corp.; and Royal Dutch
Shell PLC (RDSB) and PetroChina Co. (PTR)--this week said their
developments remain on track. But the developments are yet to hit
peak construction.
-By Ross Kelly, Dow Jones Newswires; +61-2-82724692;
ross.kelly@dowjones.com
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