Exxon Mobil Corp, the world’s third-biggest company, said the cost of its natural gas project in Papua New Guinea jumped 21 percent to US$19 billion because of a stronger Australian dollar and construction delays.
Exxon and its partners in the liquefied natural gas (LNG) venture, including Santos Ltd and Oil Search Ltd, will increase the development’s production capacity by 5 percent to 6.9 million tonnes annually, the Irving, Texas-based oil producer said yesterday in an e-mailed statement.
The Australian dollar has hovered near or above parity with the US dollar for much of the past two years. The so-called Aussie has risen about 19 percent in the past five years, the third-best performer among Group of 10 currencies, according to data compiled by Bloomberg.
Chevron Corp has said it is reviewing the costs of its A$43 billion (US$45 billion) Gorgon LNG project off northwest Australia after gains in the Australian currency.
Exxon’s development, 70 percent complete, is on schedule to start LNG sales in 2014, according to the statement. The project is among eight LNG ventures under construction in Australia and Papua New Guinea to meet rising Asian demand.
“Foreign exchange is the largest single contributor to the increase,” Exxon said. “To a lesser extent, delays from work stoppages due to community disruptions and land access led to increased construction and drilling costs.”
The increase in plant capacity and a gain in commodity prices of about 30 percent since the project was funded in 2009 will help improve its returns, according to Exxon, which announced a 5 percent cost overrun in December last year.
The strong Australian dollar will probably drive developers of LNG projects in the country to rely more heavily on building components overseas, Melbourne-based RBC Capital Markets analyst Andrew Williams said.
Adelaide-based Santos is “well positioned” to manage the impact of a strong Australian dollar on the costs of the LNG venture, the company said yesterday in a separate statement. Santos’ 13.5 percent share of the total increase in costs is about US$450 million, the Australian company said.
Port Moresby-based Oil Search will be required to contribute additional equity of about US$300 million, it said in another statement yesterday. Oil Search holds 29 percent of the PNG LNG venture, according to its Web site.
“The increase in the estimated final costs of the project is disappointing,” managing director Peter Botten said in the statement. “The extent of the change is considerably beyond the upper end of what might have been expected.”