Matt Chambers
Resources Reporter
Melbourne
View of the three CSG plants being built on Curtis Island, Gladstone. Source: News Corp Australia IT’S crunch time at Gladstone’s Curtis Island, which is to be the gateway to exports for Queensland’s vast coal-seam gas reserves.
CSG has now entered the first of three giant LNG plants being built on the island in preparation for the unprecedented start-up up of six LNG trains over two years that will at least triple the gas demand of the nation’s eastern states.
Not only is the rapid six-train ramp-up unprecedented, the large-scale export of CSG, which has the complexity of requiring thousands of onshore gas wells, is also a first.
And on top of all of the individual project challenges, five of the world’s previous seven LNG plants have been late, according to Credit Suisse.
All in all, if Bechtel, the US contractor building all three projects, can get the plants going on time (and the proponents can muster all the gas they need to feed them with) it will be a remarkable feat.
“There is little we can sensibly say about what could, or could not, go wrong on Gladstone LNG execution,” Credit Suisse analyst Mark Samter said.
“Sitting here at this stage on (delayed projects) Angola, Pluto, Yemen, etc, it was impossible to forecast what would go wrong, however, the statistics don’t lie and LNG projects have a nasty habit of being late and going over budget.”
The lead project is BG Group’s $US20 billion (21.5bn) Queensland Curtis LNG, which is aiming for first LNG exports at the end of this year. Last month, Santos and Origin Energy, which are running the two other projects, both said they were on track and feeling good about their chances to hit 2015 first production targets.
“We’ve made extremely good progress on Curtis Island,” Santos chief David Knox, who is building the $US18.5bn Gladstone LNG project, said.
“I have every expectation that we will go forward and we’ll be delivering our first cargoes in 2015.”
Santos said its first LNG train was 85 per cent, while Origin said its project was about 80 per cent.
Part of the optimism last month was based on the settlement of industrial action on Curtis Island, where there are 13,000 people working to finish the projects.
After unions demanded three-weeks-on, one-week-off, rosters (down from four-weeks-on ones currently used) members of four unions instead settled for increased pay and bonuses in an August 15 vote.
“Work on the project has returned to normal construction activity since the vote was accepted and we have a very busy end to the year with the construction of Queensland’s first LNG production facilities,” a Bechtel spokesman said.
Origin Energy chief Grant King said the enterprise bargaining agreement had been one of the biggest risks to the schedule and budget for the $25bn Australian Pacific LNG plant his company is building with US major ConocoPhillips.
“APLNG remains on track for first LNG production in mid-2015 and the approval of the EBA by unions on Curtis Island removes one of the significant risks,” Mr King said.
“So the risks, in our view, continue to diminish around delivery,” he said.
“I think that reflects that the Australian workforce can get behind these projects and make sure they work effectively.”
Getting LNG plants going on time is not impossible. Exxon Mobil proved as much this year when it brought the $US19bn Papua New Guinea LNG plant on three months early.
The scale of what is happening on Curtis Island is hard to fathom, even in an industrial town like Gladstone.
For US construction giant Bechtel, which is building about half the world’s under-construction LNG capacity, Curtis Island is the biggest LNG project it has.
The $70bn worth of plants and associated gas production are being designed to produce 25.3 million tonnes of LNG per year in massive freezers that cool the gas to minus 161C, shrinking it to 1/600th of its size ready for export to Asia.
The export revenue, if the international oil prices LNG cargoes are linked to stay around $US100 a barrel, could be $US17bn a year.
COI Price at posting:
13.5¢ Sentiment: Buy Disclosure: Held
(20min delay)
