Tuesday, January 31, 2012

Labour costs hit gas sector

Labour costs hit gas sector: But Mr Cruddas said labour shortages had affected the ability to deliver major resources projects on time and on budget. “The base costs, mainly labour, are very high in Australia, certainly for us the highest in the world at present,” Mr Cruddas said.

The comments come after credit ratings agency Fitch warned that huge capital expenditure requirements for new liquefied natural gas projects would weaken the financial strength of oil and gas companies.

Free cash flow of Australian oil and gas companies was likely to remain negative, the agency said. It expects debt funding to become more challenging, potentially forcing companies to raise fresh equity to cover project cost blowouts.

Australia has more than 60 million tonnes a year of LNG supply capacity under construction, involving 15 production units, or trains.

However, cost pressures have hit the sector hard.

Woodside Petroleum has suffered a cost blowout of more than 25 per cent at its $14.9 billion Pluto LNG project in Western Australia, which is now due to start deliveries in March.

The company also faced escalating costs over its proposed Browse LNG project, with estimates for building the plant soaring to $US40 billion or more.

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