Hiked cost dismays Botten

THE increase in the estimated final cost of the PNG LNG project caused from foreign exchange factors along with various other issues was disappointing.
Oil Search managing director Peter Botten said this in a statement which highlighted the issues that occurred to increase costs for the project.
Exxon Mobil, which is Oil Search’s partner in the PNG LNG project, also told its partners that costs would rise 21 % to US$19 billion due to foreign exchange impacts and delays from work stoppages and land access issues.
Esso Highlands Ltd, a subsidiary of Exxon Mobil in which Oil Search has a 29% interest, indicated the cost estimates for the project had risen from US$15.7 billion to US$19 billion mainly due to foreign exchange factors.
In addition, delays from work stoppages and land access issues along with unfavourable weather conditions had added to the cost of the project.
The increased cost is expected to be met in line with the project’s existing financing terms, Oil Search said.
The company said it expected to contribute US$300 million more in equity, while Santos was expected to contribute a further US$130 million.
“The extent of the change is considerably beyond the upper end of what might have been expected from cash draw downs and project progress to date,” Botten said.
“In addition, the estimated foreign exchange impacts and the amount allowed for additional contingency is higher than we would have anticipated.
“Oil Search intends to fully review the revised estimates and is committed to working with the operator to seek to mitigate these estimated cost increases.”
However, despite the rise in the cost of the project, both Botten and Santos chief financial officer Andrew Seaton said the LNG Project remained a highly robust economic project and was on track for its first production in 2014.