The Cliff Head oil project has reported a three-week delay and a further 7.5 per cent cost increase, adding to a long and expensive list of cost increases.
The Cliff Head oil project has reported a three-week delay and a further 7.5 per cent cost increase, adding to a long and expensive list of cost increases.
The project, operated by Roc Oil in the offshore Perth Basin, is now expected to cost a total of $285 million.
That compared with the $227 million budget estimate 12 months ago, when Roc and its joint venture partners committed to proceed with the project.
That, in turn, was well above the original budget estimate of $156 million provided in April 2004.
The increases partly reflect changes in the project scope but mostly reflect the cost pressures facing the resources and construction sectors, which are being affected by rising material prices, labour shortages and equipment delays.
Roc also announced that commissioning of the project was well advanced.
It said that "on a problem-free basis" the first two oil production wells are expected to be ready to deliver their first oil by mid April 2006.
Below is the full announcement:
CLIFF HEAD OIL FIELD ACTIVITY UPDATE
ROC Oil Company Limited ("ROC"), as operator and stakeholder in the Cliff Head project, today released an
update on the project to the Australian Stock Exchange. ARC holds a 6% stake in the project and an extract from
ROC's release referring to the Cliff Head operations is as follows:
Cliff Head Oil Field, Offshore Perth Basin, Western Australia (ROC: 37.5% and Operator)
"The onshore Arrowsmith Stabilisation Plant ("ASP"), which will receive the oil produced from the Cliff Head Oil
Field, is mechanically complete. Commissioning is well advanced with all pipelines and umbilicals successfully
hydro-tested and fuel gas (sourced from Arc Energy Ltd) delivered to the plant. The main outstanding work at the
ASP includes powering-up and commissioning the generators and water injection pumps.
Subsequent to the jack up drilling rig lifting the production deck onto the well head jacket and the installation on the
deck of the Coil Tubing Unit, to be used for maintenance and interventions, the main focus of the offshore work is
now on drilling and completing the development wells.
Currently, drilling is running about three weeks behind schedule due to a number of factors including two stuck-pipe
instances, both of which were resolved. Other factors which have influenced the precise timing of the development
include: availability of contractor personnel; adverse weather conditions affecting the timing of the offshore
platform-pipeline hook up; and equipment at the ASP.
On a problem free basis, the first two oil production wells, CH-7H and CH-6, are expected to be ready to deliver
first oil to the ASP by mid April 2006. The remaining development wells will then be brought on stream through the
balance of April/May 2006 to ramp up total field production to the production of in excess of 10,000 BOPD. In its
first year, Cliff Head oil production is expected to equate to approximately 10% of Western Australia's oil
consumption.
The delay factors have also resulted in an approximate $20 million (7.5%) increase in budget projections compared
to the most recent estimate of $265 million. This budget revision represents a $43 million (19%) increase compared
to the $227 million budget estimate provided at Final Investment Decision in March 2005, and excluding the
approximately $15 million relating to increases in project scope."
ends
