Cost blowouts have added to the cost on LNG projects in Gladstone.
Cost blowouts have added to the cost on LNG projects in Gladstone. David Sparkes

Gladstone gas projects rise in value, but not in a good way

THE pipeline of the nation's advanced resources projects has risen to a record value for all the wrong reasons, according to a report by the Bureau of Resources and Energy Economics.

Cost blowouts have  boosted the value of projects under construction by $8 billion to a record $268.4bn in the six months to the end of October.

The trend, announced on Wednesday by the government forecaster, is expected to continue with a $10bn to $20bn cost blowout of Chevron's giant Gorgon LNG project, due in coming weeks.

Cost blowouts in the past six months at BG Group's Queensland Curtis LNG plant have been $4bn, and the Santos-led Gladstone LNG project has increased by $2bn.

"Australia's LNG industry is not alone in experiencing these pressures but, as a high-cost country, Australia is particularly vulnerable to further cost increases in terms of its impact on future investment," the bureau said in its half-yearly Resources and Energy Major Projects report.

News Ltd reports that in response to the figures, Santos said its latest capital expenditure estimate for Gladstone LNG, from the middle of the year, remained current.

But the company agreed the nation's high-cost environment would threaten new projects, particularly as potential new LNG exports threatened to emerge from places such as the onshore shale gas fields of the US and offshore gas fields of east Africa.

Santos and BG Group said they had fixed-price construction contracts that now gave them confidence about their estimates.



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