By Angela Macdonald-Smith
Dec. 3 (Bloomberg) -- Australia’s North West Shelf oil and gas venture approved a A$1.8 billion ($1.2 billion) investment to extend the life of the Cossack project off the northwest coast beyond 2020.
The investment to replace the production ship will prolong output from the Cossack, Wanaea, Lambert and Hermes fields and allow output from potential discoveries in the area, Melbourne- based BHP Billiton Ltd., a partner in the venture, said today in an e-mailed statement. The redevelopment project will be completed by early 2011, it said.
Partners in the A$25 billion North West Shelf venture partners, led by Woodside Petroleum Ltd., in May agreed to replace the production vessel at the field instead of refitting the existing Cossack Pioneer ship because it would cost about the same while shortening the required production shutdown. Cossack, which has been in operation since 1995, produced 60,863 barrels a day of oil in the third quarter.
The investment “will ensure continued safe and reliable production from these fields for many years to come,” Eve Howell, Perth-based Woodside’s executive vice president for the North West Shelf, said in a separate statement to the Australian stock exchange.
Woodside, which owns one-third of the oil venture after buying Royal Dutch Shell Plc’s stake earlier this year, said its share of the investment is A$600 million. BHP, a one-sixth partner, gave its share as $245 million. BP Plc, Chevron Corp. and a venture between Mitsubishi Corp. and Mitsui & Co. also own stakes.
SBM Ship
Woodside last month estimated it would spend A$585 million on the North West Shelf venture next year, when its capital investment in projects and exploration is set to jump by 33 percent to A$7.3 billion. A decline in the crude-oil price, which has slumped more than 60 percent since a July peak, and tighter credit markets mean Woodside may need to sell stock next year to cover spending plans, JPMorgan Chase & Co. said Nov. 24.
The new ship will be the Okha, to be converted for use by SBM Offshore NV, BHP said. Underwater production systems will also be replaced as part of the project. Engineering reviews last year showed that replacing the vessel would entail a 2-3 month shutdown of oil production, while a refurbishment would entail a 10-month stoppage, according to a report by Deloitte Touche Tohmatsu in February.
“We anticipate this project will generate over 10 million barrels of oil (BHP Billiton’s share) during its life and it will also extend the life of these fields beyond 2020,” said J. Michael Yeager, chief executive officer of BHP’s petroleum unit.
The replacement of the vessel is one of several plans by the venture to ensure growth, including a A$5 billion investment approved in March in a new offshore gas production platform, North Rankin 2, a A$1.6 billion expansion in liquefied natural gas production capacity, which started up in August, and the A$1.6 billion Angel gas project, which began production in October.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
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