Woodside Petroleum is facing unspecified delays in commissioning its $13 billion Pluto LNG project after warning some key plant infrastructure does not meet its cyclone rating standards.
Woodside Petroleum is facing unspecified delays in commissioning its $13 billion Pluto LNG project after warning some key plant infrastructure does not meet its cyclone rating standards.
The project was originally expected to export its first gas by the end of the March 2011 quarter, but exports now appear likely to be delayed at least until the end of the looming cyclone season.
Handing down its third quarter report today, Woodside said the Pluto foundation project was 94 per cent complete, but that the flare towers installed did not meet its wind loading specifications.
"Some sections of the flare towers are being dismantled in preparation for the approaching cyclone season and corrective action," the company said.
Woodside indicated it would not be responsible for any cost blowouts associated with the problem, noting that the towers were "managed by the engineering, procurement and construction management contractor via a flare design and fabrication specialist".
It is understood that Woodside's standards require the towers to be able to withstand a 1-in-1000 year cyclonic event.
Woodside did not give any clear indication of when the project would be able to commence operations, saying a comprehensive periodic cost and schedule evaluation was underway, the results of which would be available in November.
However, the need to dismantle components ahead of the cyclone season would suggest delays could extend at least until the end of the season, which typically runs from November to the end of April.
The WA Bureau of Meteorology this month warned WA is facing a particularly severe season with up to seven cyclones considered likely, compared to the usual five.
The problem at Pluto was the biggest negative in a mixed quarter for Woodside in which production volumes grew by five per cent, while sales revenue was down four per cent on the previous quarter.
Woodside said the higher volumes compared with the second quarter of 2010 were largely driven by the North West Shelf (NWS), with record liquefied natural gas (LNG) and liquefied petroleum gas (LPG) production, plus increases in condensate, North West Shelf oil and pipeline gas.
Oil production at Vincent also increased due to higher facility uptime, the company said.
The fall in sales revenue in the third quarter was due to one-off payments arising from the settlement of some LNG price negotiations included in the second quarter results, Woodside said.
"This comparative reduction in the Q3 2010 revenue was partially offset by increased sales volumes and higher underlying LNG prices," the company said.
Compared to the September 2009 quarter, production volumes fell 11 per cent largely due to the sale of Woodside's interest in the Otway gas project in Victoria in March and natural oil field decline.
But sales revenue in in the third quarter of 2010 increased 15 per cent on the same quarter last year, primarily as a result of improved commodity prices.
On the development front, Woodside said its massive North Rankin 2 development remained on track for completion in 2013, while its North West Shelf Oil redevelopment was on track to start production in the June 2011 quarter.
Woodside said it had also completed onshore front end engineering and design studies for both the second and third proposed LNG trains at Pluto, though the expansion remained contingent on ongoing exploration success and commercial discussions with other gas owners interested in processing their gas at Pluto.
The company also said the preliminary field development plan for the $30 billion Browse LNG project in the Kimberley had been submitted to state and federal regulators for assessment.
Woodside shares closed 66 cents lower at $43.50.