Reuters: US Dollar Report: UPDATE 1-Chevron adds $15 bln to estimated Gorgon project cost

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UPDATE 1-Chevron adds $15 bln to estimated Gorgon project cost Dec 5th 2012, 22:08 Wed Dec 5, 2012 5:08pm EST Dec 5 (Reuters) - Chevron Corp added $15 billion to the cost of the Gorgon liquefied natural gas (LNG) export complex, as the U.S. oil company's largest single development joins a growing list of Australian LNG projects to run over budget. The new $52 billion estimate for Gorgon, now 55 percent complete, came on Wednesday alongside Chevron's $36.7 billion overall 2013 budget for capital and exploratory spending. That compares with a 2012 budget of $32.7 billion, and is just shy of the $37 billion annual budget of far-larger Exxon Mobil Corp . Like other Australian LNG projects, Gorgon's inflated cost is largely due to labor shortages, logistics challenges and the strength of the Australian dollar. Half of the six other LNG plants being built in the country have sustained cost increases averaging more than 20 percent. Chevron said about one-third of the projected increase from its 2009 estimate of $37 billion, or A$43 billion, was due to the appreciating Aussie dollar and a change in the mix of currencies since the project was sanctioned. Chevron owns 47 percent of Gorgon, while Exxon and Royal Dutch Shell Plc each hold 25 percent stakes and the rest is shared by Japanese LNG buyers Osaka Gas, Tokyo Gas and Chubu Electric. The updated cost figure for Gorgon, located on a remote island off Western Australia, is basically right in the middle of analyst estimates that ran from $45 billion to $60 billion. But analysts and Chevron executives argue the project remains profitable because the price of Gorgon's output will be linked to oil and demand for natural gas in Asia is only growing. "I believe it will hit the market at the right time," Joe Geagea, the head of Chevron's gas business, said in an interview in Tokyo. "In the next 2-3 years there are not too many projects coming on line." Link this Share this Digg this Email Reprints

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