BG’s Coal-Seam LNG Project Hit By $5 Billion Escalation

June 2012 Vol. 239 No. 6

A $5 billion cost escalation has hit British gas giant BG Group’s Gladstone coal-seam gas export project amid rising local costs, increased regulatory hurdles and a surging Australian dollar.

The 33% blowout has pushed the price tag for the project, one of three giant LNG plants under construction at Gladstone, to $20 billion.

“Despite cost pressures, the project remains firmly on track for first LNG in 2014,” BG chief executive Frank Chapman said.

“Increasing costs for local goods and services … are clearly evident,” the London company said in its quarterly earnings report. “BG Group now estimates that the sanctioned investment of $15 billion will increase by 19% due to local market effects, increased costs of compliance with regulatory processes and some scope change.” A 20% surge in the dollar since the project was approved last year accounted for the rest of the increase to $20 billion.