ExxonMobil Corp. is learning that it's not just ships that can suffer in
the treacherous seas that separate Tasmania and Australia's mainland.
Persistent mercury contamination of gas beneath the Bass
Strait seafloor has forced Exxon
and two Australian partners to consider building mercury-removal
equipment, potentially causing project delays and cost overruns. Mercury
is a curse of gas producers around the world and Australia is no
exception.
It's over a year ago since the U.S. oil giant revised upward
its budget for the Kipper and Turrum projects in the Bass Strait to
US$4.4 billion from US$2.7 billion, citing delays, technical challenges
and labor shortages.
Now, persistent contamination issues could potentially push
Kipper first gas, already delayed to 2012, out by another three or four
years.
"The Kipper facility construction is still expected to be
completed in 2012. The gas will come on line when dedicated mercury
removal equipment is installed, and that's expected to come on line in
2016," an ExxonMobil spokeswoman told Deal Journal Australia.
First oil from Turrum is expected in early 2014, which is a
few months later than the revised 2013 target due to weather impacts
during the early construction phase, the spokeswoman said.
The revised US$4.4 billion budget for the Kipper and Turrum
developments is unchanged. However, the mercury removal undertaking will
be counted as a separate project that has yet to be costed, she said.
The Kipper, Turrum and related Tuna projects are designed to
help meet Victoria state's domestic energy needs. Exxon
has said the fields hold enough energy to power a city of a million
people for 35 years
Exxon
and BHP jointly own Turrum and each have a 32.5% stake in Kipper, of
which Santos owns the remaining 35%.
Santos was the first company to reveal the fresh problems at
Kipper in a quarterly production report Thursday after BHP Billiton told
the market Wednesday that everything was on track.
Although an obvious setback for all involved, the delay isn't
all bad news.
By 2016 its likely the joint venture will get higher prices
for its gas as massive gas-export terminals in Queensland go live and
start sucking up reserves, putting pressure on domestic supplies.
Even in the Bass Strait, every cloud has a silver lining.