BG: Australian LNG Project on Budget

BRISBANE, Australia - Attempting to calm investor fears of more cost blowouts, the head of BG Group PLC's Australian unit said Wednesday the company's US$20.4 billion gas-export plant in Queensland state will be completed in line with its revised budget. 

"We will meet the budget that we gave out to the world," Derek Fisher told reporters. 

U.K.-based BG is on track to start shipping cargoes of liquefied natural gas, or LNG, from the plant at Gladstone next year. 

Its foundation stage will have two LNG processing units, known as trains. BG suffered a setback last year when it overran its initial US$15 billion budget for the foundation stage by 36% due to a high Australian dollar and technical challenges. 

Mr. Fisher said the company's current cost estimate assumed the Australian dollar would remain at parity with the U.S. dollar. The Australian dollar has fallen substantially in the past month, hitting a 19-month low of around US$0.95 on Wednesday. 

Mr. Fisher reiterated recent comments by BG Chief Executive Chris Finlayson that the company would need to spend another two or three years exploring for gas trapped in coal seams before it could consider expanding the project. 

The two-to-three year timeframe is much longer than the company's original plan to make a final investment decision on a third train by 2102 – a plan that Mr. Fisher described Wednesday as "very aggressive". 

BG increased its Australian exploration budget this year, and the company is now spending more in Australia on exploration than anywhere else in the world, Mr. Fisher said, adding he expects it to rise again next year. Discoveries could either support a third LNG train or supply Australia's domestic gas market. 

The company is mulling four possible LNG developments, including an expansion of the Australian project and other potential projects in the U.S., Brazil and East Africa. 

"To be blunt, we have a full plate. I don't think we'll develop all four," Mr. Fisher said.

Copyright (c) 2012 Dow Jones & Company, Inc.


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