Chevron has confirmed a major cost blowout at its Gorgon liquefied natural gas development off the Western Australian coast, but it is not as large as speculated.
Chevron said the budget had increased from $43 billion to $52 billion, well under the $60 billion that was widely speculated in recent media reports.
In US dollar terms, the increase was substantially greater, from $US37 billion, to $US52billion.
The oil and gas giant said labour costs and productivity issues were the main reasons behind the cost increase, as well as the continued strength of the Australian dollar.
Chevron also pushed back the timetable for startup at Gorgon by about three months, with first LNG cargo now scheduled for the first quarter of 2015 and start-up scheduled to occur in 2014.
Chevron vice chairman George Kirkland said despite the cost and timetable blowout the economics of the project were still attractive.
"While investment requirements have grown, oil prices, which directly impact the overall revenue stream, have increased by approximately 80 per cent over the same time period," he said.
He added that the LNG capacity for Gorgon had increased by four per cent, to 15.6 million tons a year.
Chevron continued to discover additional gas resources which could support future expansions of our Australian LNG developments, he said.
The news about the Gorgon cost blowout comes as Chevron announced an overall international investment budget of $37 billion for 2013, including major investments in Australia, Nigeria, the US deepwater Gulf of Mexico, Kazakhstan, Angola and the Republic of Congo.
Gorgon encompasses 11 gas fields and an LNG plant on Barrow Island expected to last at least 40 years.
Chevron operates Gorgon and has a 47.3 per cent stake, with fellow petroleum majors Exxon Mobil and Shell holding 25 per cent.
Sales agreements for up to 25 years have been reached for Gorgon with customers in China, India, Japan and South Korea.
Chevron added that its Wheatstone LNG project in WA is currently seven per cent complete and is on budget and schedule.