Oil and gas giant Chevron is blaming the high labour cost, logistical challenges on its remote sites and delays caused by weather as the main reasons why its Gorgon liquefied natural gas (LNG) project in Western Australia is on a second cost blowout.
REUTERS Chevron Australia has unlocked more gas discoveries in the Carnarvon Basin, off Western Australia, bringing its total discovery haul to 19 just in the area alone.
With the projected extra expenses, Chevron's cost ballooned to $54 billion from the original $37 billion in 2009 which climbed up to $52 billion in 2012.
Along with the soaring costs, Chevron has to delay the target of first gas to mid-2015 from previous target of start of 2015.
The Maritime Union of Australia, through its WA secretary, Christy Cain, said the union should not be blamed for the cost blowout but pinpointed red tape and waste as the causes. He cited vessels loaded on hire that cost millions of dollars while just sitting on the island.
Despite the escalating costs, Chevron Vice Chairman George Kirkland said the venture is still an attractive undertaking for the oil giant.
"These LNG developments are two of our most important future legacy assets, representing approximately 400,000 barrels a day of net production at full capacity ... The will be a substantial contributors to our cash flow for decades to come," The Sydney Morning Herald quoted Mr Kirkland.
Chevron has Exxon Mobil and Shell as partners for the LNG venture.