Australia's Santos said Thursday that the cost of its Gladstone liquefied natural gas (GLNG) project will increase by 16-percent to $18.5 billion and that it needs to scour for more gas ahead of its planned 2015 start-up.
The increase in the project's cost stems from the fact that Santos will bring forward a $2.5 billion expenditure which was initially slated to be spent after 2015. The company needs the extra cash to drill an additional 300 wells, Santos said.
"The company is not immune from industry cost pressures. Today's announcement was not about significant overruns or changes to the scope of works," Santos CEO David Knox said in a statement.
"The key challenge facing the coal stream gas (CSG) to LNG projects upstream field is deliverability in the early stages of project ramp-up," added Knox.
Santos emphasized the fact that it does not need to raise additional debt for the project, and that the Gladstone plant is on track for first LNG by 2015.
The Santos GLNG project was conceived to convert CSG to LNG in the Bowen and Surat basins in southeast Queensland. The project involves the construction of a 260-mile (420-kilometer) gas transmission pipeline from the gas fields to Gladstone. The Gladstone plant will consist of two LNG trains and port development infrastructure.
Commenting on the employment impact of the GLNG project, Santos said that the development "will create thousands of jobs across many disciplines."
Korea Gas Corporation (KOGAS) and Malaysia's Petronas have signed LNG offtake agreements with Santos.
Santos holds a 30-percent stake in the GLNG project, while France's Total and Petronas each hold at 27.5-percent stake. KOGAS holds the remaining 15-percent stake.
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