BHP Says Gas Venture Costs to Rise by $1.1 Billion

Bloomberg Jan 20---BHP Billiton Ltd., Australia’s largest oil and natural gas producer, said the Turrum and Kipper gas ventures off the nation’s southeast coast will cost the company about $1.1 billion more than it had forecast.

The projects in the Bass Strait, operated by Exxon Mobil Corp., also have been delayed after mercury was found in the reservoir during the Kipper drilling, Melbourne-based BHP said today in a statement. Increasing raw material expenses and wages are among the factors contributing to the cost increases, BHP spokeswoman Amanda Buckley said by phone today.

BHP’s share of the estimated Turrum cost jumped to $1.35 billion, the company said. That compares with its October estimate of $625 million. BHP’s spending on Kipper is set to rise to $900 million from a prior $500 million forecast.

“Despite disappointing delays and capital cost increases, BHP Billiton’s long-term production expectations for the Bass Strait venture remain unchanged,” Buckley said.

BHP fell 1.6 percent to A$45.32 at 10:12 a.m. Sydney time on the Australian stock exchange.

Turrum is expected to begin production in 2013, while the Kipper facilities are now forecast to be finished in 2012, BHP said today. In October, BHP had said that initial production from both Bass Strait projects was expected in 2011.

Exxon and BHP each have 32.5 percent of the Kipper venture, while Australian gas producer Santos Ltd. has 35 percent, BHP said. Turrum is part of the Gippsland Basin venture, in which BHP and Exxon each has a 50 percent stake, according to BHP.