BHP’s costs blow out on Vic gas ventures

BHP Billiton says two of its natural gas projects in Victoria will cost the company about $1.1 billion more than expected, after mercury contamination and fabrication issues blew out production timelines.

BHP's Kipper project, located in the Gippsland Basin off Victoria, is now forecast to be completed in 2012 at a cost of $US900 million ($903 million) after mercury was found in the gas reservoir during exploration drilling.

BHP previously forecast Kipper, a joint venture with Exxon Mobil and Santos, would cost $US500 million ($501 million) to develop.

Production will not resume at Kipper until first production the mercury issues are resolved.

And the Turrum project, also in the Gippsland Basin, has seen its budget blow out to $1.3 billion after being plagued by design and fabrication issues for key structural components.

Turrum is now forecast to begin production in 2013. Its original budget, announced last October, was $US625 million.

Turrum is a 50-50 joint venture between BHP and Exxon.

In October, BHP said initial production from both projects was due in 2011.