Startup of Australian Gas Project Delayed Due to Labor Shortage

Startup of Australian Gas Project Delayed Due to Labor Shortage
The Waitsia Stage 2 project could not start production in 2023 as targeted.
Image by phive2015 via iStock

Beach Energy Ltd. said Thursday it could not fulfill the 2023 target first production of a gas project onshore Western Australia due to a labor shortage.

The Waitsia Stage 2 project had already been threatened when construction contractor Clough Ltd. submitted into voluntary administration after the failed sale of its business, as announced by Clough December 5.

But Beach said February 6 it has reached a deal with Webuild SPA, which eventually acquired Clough, for the completion of the Perth Basin project.

However Beach announced Thursday: “Since then, the tight labor market in Western Australia in particular has impacted construction progress at the Waitsia Gas Plant to create a range of uncertainty in outcomes that means Beach no longer considers it prudent or appropriate to maintain its previously targeted schedule and capital estimates”.

Beach had eyed startup this year for Waitsia Stage 2, which targets a gross production of as much as 1.5 million metric tons of liquefied natural gas (LNG) a year until 2028. The project includes the drilling of six wells in maximum and the construction of a gas processing facility, according to Beach’s final investment decision announced December 23, 2020.

The pipeline to carry gas from the second Waitsia plant is already in place after construction for Waitsia Stage One. The gas is to be conveyed further to the Dampier to Bunbury Natural Gas Pipeline of the Australian Gas Infrastructure Group, with which Beach has already signed an agreement, before delivery at the North West Shelf, where the gas would be exported, according to the December 23 release.

Beach also said in that announcement it has entered a pact with the state government for the export of up to 7.5 million metric tons of LNG till 2028.

It revised its capital expenditure for the project to $400-450 million in net costs to Beach alone, as stated in the February 6 announcement of the agreement with Webuild.

On September 27, 2021, Beach said it had inked heads of agreement with BP Singapore Pte. Ltd. for the BP subsidiary to buy all 3.75 million metric tons of Beach’s projected LNG volumes from the project.

Thursday’s update said: “Review of cost and schedule by the Waitsia Joint Venture operator and Webuild is ongoing to identify and implement opportunities to mitigate impacts on the project and constrain the range of uncertainty. Beach will provide an update when this review is concluded.

“The Waitsia project remains strongly value accretive and a key element in Beach’s future growth”.

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