North Australia Digest 13/11/2012

by 13 November 2012

The Australian

Fears are mounting that Woodside Petroleum may develop its $40 billion Browse energy project using floating LNG technology, after the company dismantled its work compound at James Price Point in the Kimberley. The move comes as Woodside evaluates the tender bids for construction of the Browse project amid estimates that cost of a greenfields project in the Kimberley is likely to be prohibitive.

Speaking at the Origin Energy AGM, Managing Director Grant King has said the regulatory environment is causing “substantial challenges” as the company tries to fund its share of the $23 billion Australia Pacific LNG project.

The Australian Financial Review

BHP is “studying closely” the possibilities of shipping US shale gas to supply Asian markets –entering direct competition with huge liquefied natural gas projects in Queensland, the Northern Territory and West Australia. Mike Yeager, chief executive of BHP’s petroleum division, has expressed concerns about the cost of developing Australian gas fields, with high wage and material costs, heavy government regulation and remote locations all adding substantially to costs.

The mood at the Australian Resources Conference and Trade Show in Perth this week reflects a far more cautious tone than six months ago, according to Jennifer Hewett. Despite hundreds of billions of dollars of resources investment under construction, regular announcements of project delays, shelved expansion plans, job cuts and scepticism from investors have curbed any “wild exuberance – even in Western Australia.”

Rio Tinto has added to fears of a slowdown in the resources boom after warning capital costs in Australia have accelerated faster than any other mining jurisdiction in the world. In his address to the Australian Resources Conference in Perth today, Rio Tinto Australia managing director David Peever will argue that more than half of Australia’s coal, copper and nickel mines have cost above the global average.

A shock 20 per cent cost blow out at ExxonMobile’s LNG project in Papua New Guinea has raised fears of more heavy overruns for Australian projects. Australia currently has $170 billion worth of LNG projects under construction – many of which are already billions of dollars over budget. “All the LNG projects are facing similar issues, but with ExxonMobil having such a good reputation for delivering projects on time and budget we are a bit surprised that capex has blown out by that much,” Bell Potter analyst Johan Hedstrom said.

Property prices in the town of Geraldton are expected to stagnate after the news Mitsubishi Corp would freeze spending and cut its workforce on the troubled $6 billion Oakjee port and rail development in the region.

The Age

ExxonMobile’s PNG LNG project cost blow-out has stoked fears a planned second wave of Australian LNG projects might struggle to gain approval. Bell Potter energy analyst Johan Hedstrom said Monday’s announcement was “yet another sign we are facing serious cost pressures.”

The Courier Mail

A biannual report by consultants Economic and Market Development Advisors (EMDA) predicts 137,000 jobs will be added to the Australian economy by August next year –  led by demand in the mining industry. EMDA’s report predicts Western Australia will lead the way with 2.5 per cent employment growth, followed by Queensland at 1.2 per cent.

The West Australian 

BHP Billiton has identified the Canning Basin in the Kimberley as a possible site for shale gas expansion. The head of BHP’s petroleum division, Mike Yeager, said Australia’s “preferential location” to Asian LNG customers meant BHP had to look at unconventional opportunities here, and he singled out the onshore Canning Basin as a key target.

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