SYDNEY (Dow Jones)
Woodside Petroleum Ltd. (WPL.AU) on Friday announced a shock six-month delay and additional A$900 million cost overrun for its Pluto gas export project in Western Australia state.
The first cargoes of liquefied natural gas are now expected to be shipped to Japanese customers Kansai Electric Power Co. (9503.TO) and Toyko Gas Co. (9531.TO) in March 2012, compared with previous guidance of September this year, Woodside said.
The delay is expected to result in a A$900 million cost increase, to A$14.9 billion, it added.
Less than a month after taking the reins from Don Voelte, new Woodside Chief Executive Peter Coleman said in a statement that he was "disappointed to have to advise of a change in the schedule."
Pluto's progress has been delayed several times in the past by strike action by construction workers, a shortage of skilled labor in Australia's booming economy and the reinstallation of flare towers that weren't cyclone-proof.
This time, Woodside said the delay has been caused by seven weeks of bad weather and "slower-than-expected progress" on the commissioning of the onshore LNG plant, suggesting that final adjustments have had to be made following a final checking process.
"While we would like to start up the project as quickly as possible, we will not be doing so until we are satisfied the commissioning work has been completed in a thorough and safe manner," Coleman said.
The delay is surprising because Voelte in April said it would be difficult to recover a four-week delay to the construction timetable, but that Woodside was still targeting delivery of the first cargo in September. The postponement to March is over six times longer than the four weeks suggested by Voelte.
"It's a major disappointment and probably doesn't help the whole sector," Southern Cross Equities Executive Director Charlie Aitken said.
At 0228 GMT, Woodside shares were down 3.8% at A$40.80 in an overall market up 0.6%.
Backup LNG supplies from external sources are available to meet scheduled deliveries to the project's Japanese customers in the event of a delay, Woodside said last year.
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