Beach announces delay, cost increase for Waitsia Stage 2 gas project
Australian gas producer Beach Energy on April 8 announced fresh delay and cost escalation on its Waitsia Stage 2 gas project located in Western Australia due to quality issues encountered during pre-commissioning activities.
As a result, the company has revised its share of the total capital expenditure estimate for the project to between A$600mn ($394mn) and A$650mn. This adjustment represents an increase from the previous estimate of A$400mn to A$450mn, following a prior increase of A$50mn last year.
Waitsia gas plant’s first gas is now expected by early-2025 instead of mid-2024, with a planned three-month ramp-up of production thereafter. The first gas was originally expected in May 2023. This delay has been attributed to ongoing quality and execution issues, which have necessitated the redirection of onsite labor to remedial works, further impeding progress and leading to additional cost implications.
"Having to redirect existing onsite labour to remedial works is slowing the progress of pre-commissioning activities, resulting in further delay and cost increases,” Beach CEO Brett Woods said.
In response to the delays, the joint venture is exploring commercial arrangements to facilitate LNG cargo liftings prior to the completion of the Waitsia gas plant. In addition to the LNG cargo lifted in December 2023, Beach expects to lift one more LNG cargo in FY24.
“To facilitate these cargoes, the Waitsia joint venture continues to explore mutually beneficial time swap opportunities with Western Australia gas market participants who have excess gas prior to completion of the Waitsia gas plant, in exchange for returning these volumes when they need them most,” Beach said.
The Waitsia gas field is one of the largest onshore gas fields ever found in Australia. In 2020, Beach Energy and Japan's Mitsui made a final investment decision to proceed with the project.
Beach had secured an important agreement with BP in September 2022. This agreement solidified BP's commitment to purchase all 3.75mn tonnes/year of LNG volumes expected from the Waitsia Stage 2 project. LNG is to be delivered on a free on board basis from the North West Shelf (NWS) facilities in Karratha, Western Australia. BP is an existing participant in the NWS joint venture.