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Australia's LNG projects face major delays – part two

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Reuters are reporting that at the US$35 billion Ichthys project, engineering firm CIMIC this week pulled out of its contract to build the facility's power station, citing cost overruns.

Ichthys, which includes a stationary rig and a floating production vessel, was due to start operations between July and September this year, but the power station problem will almost certainly cause more delays and costs.

At Gorgon, which has cost US$55 billion to develop and which started operations last year, there are problems in bringing expanded production online.

Delays are also expected at Shell's Prelude. The production vessel, the world's biggest ship at 0.5 km in length, is currently being built in South Korea.

Scheduled to generate cash flow by 2018, one source with the shipyard and another with one of Prelude's LNG buyers said it was unlikely that Prelude would produce any gas before late 2018, maybe even 2019.

Potential delays and cost overruns are likely to have a big impact on returns on investment.

Beyond adding to already huge costs for its developers, the delays will have a strong market impact.

For 2017, they mean a tighter market than initially expected, and prices have already reacted. The Asian spot LNG price almost doubled between June last year and January 2017 to more than US$9 per million British thermal units, its highest since 2014.

The delays are happening just as new supplies are coming on stream elsewhere. Seven US export projects are currently approved, with a potential to reach 50 million tpy by the early 2020s.

Read the article online at: https://www.lngindustry.com/liquefaction/27012017/australias-lng-projects-face-major-delays-part-two/


 

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