AWE attacks Origin over Bass Strait worry

13 Jul 2012, 3:58 pm   -   Source: AAP

Energy company AWE has attacked its bigger JV partner Origin Energy after it hit a snag causing cost increases in the Bass Strait project

Energy company AWE has publicly attacked its far bigger joint venture partner Origin Energy after the latest cost blow-out at the troubled gas project in Bass Strait.

Origin announced on Friday that it had hit problems with the failure to install a compression module on an offshore platform.

The Yolla gas field in the waters between Victoria and Tasmania is being upgraded by operators Origin from an unmanned offshore platform to a manned platform, stopping production.

Production at Yolla was originally slated to re-start this month.

The upgrade requires installing a compression module to help with gas flows, enabling gas to flow at the same rate as the natural free flow rates seen in the early years of a gas field project.

The failure means it now can not be installed until summer.

AWE estimated that the delays would lead to a $90 million to $120 million increase in the gross project budget to $550 million to $580 million, with $380 million spent so far.

Friday's news follows a $100 million blowout at BassGas from $360 million to $460 million earlier this year and time delays in completing the project in the middle of Bass Strait.

AWE managing director Bruce Clement described the additional capital costs and project delays as extremely disappointing and said he was looking at opportunities to reducing the impact of those cost overruns.

"In light of the history of the project and this schedule delay and budget increase, AWE continues to be very disappointed with the project delivery performance by the operator (Origin)," he said in a statement.

"However, despite these issues, which have impacted AWE in the short term, we remain confident in the future value and potential of the asset."

Origin chief executive upstream Paul Zealand said current weather conditions in Bass Strait would delay completing the compressor lift and installation prior to completion of all other phase one works.

Origin said the costs for the upgrade project would only increase by $30 million to about $490 million.

The extra costs would be determined as part of a final decision on the broader works program at Yolla, including phase two of the upgrade project, the company said.

Yolla is part of the BassGas Project, a joint venture between Origin, AWE and Toyota Tsusho Gas E&P Trefoil.

BassGas already provides gas supply into Victoria with the current upgrade aiming to commercialise gas from the Yolla gas field in Bass Strait and meet about 10 per cent of Victoria's demand for 15 years.

Origin's shares were flat at $12.02 at 1530 AEST while AWE stocks were also unchanged at $1.39.

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