SYDNEY (Dow Jones Newswires), Jan. 20, 2011
Exxon Mobil said that the offshore oil projects it's helping to develop and operate in Australia are over budget and face delays amid rising costs for engineering services and a tight labor market in the Pacific nation.
Oil production from the Kipper development will be pushed back a year to 2012 and total development costs for the project including the Tuna and Turrum ventures has increased to a total US $4.4 billion, from an initial estimate of US $2.7 billion, the company said.
An Exxon spokeswoman confirmed the cost increases and delays after its partner BHP Billiton cited overruns in a filing to the Australian Securities Exchange.
Exxon and BHP jointly own Turrum and each have a 32.5% stake in Kipper. Australia's Santos owns the remaining 35% of the Kipper project.
BHP said the cost of its 50% share of Turrum has increased to US $1.35 billion, from US $625 million. The estimated cost of the miner's 32.5% share of Kipper has increased to US $900 million from US $500 million.
The Exxon spokeswoman said additional design requirements and cost pressures in Australia's booming resource industry have pushed up project costs.
"We are seeing significantly higher labor rates in Australia, which have increased the cost in addition to some changes we have made to the scope of the project," she said.
BHP said it production delays in the Kipper project were caused by the discovery of mercury in the reservoir.
Copyright (c) 2011 Dow Jones & Company, Inc.
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