SYDNEY (Dow Jones)
Strike action has again hit Woodside Petroleum Ltd.'s (WPL.AU) A$13 billion Pluto liquefied natural gas project and this time the oil company has warned of delays and cost increases if the strike continues.
A dozen crane and forklift workers have been on strike since April 28 over pay and conditions, Woodside said Wednesday. The action follows two recent strikes at the project in Western Australia state by construction workers over an accommodation dispute.
Woodside wants to build three new LNG projects; Pluto, Browse and Sunrise, to make it one of the world's biggest gas exporters.
There was some good news for Woodside on Sunrise Wednesday, with East Timor President Hose Ramos-Horta suggesting that the small nation will consider all options for developing the Greater Sunrise gas resource, including Woodside's preferred option for a floating LNG vessel. Ramos-Horta, however, reiterated East Timor's current preference for a gas processing hub on its own shores.
There's always been doubts that Sunrise will be built to Woodside's schedule and analysts aren't attributing much value to the project in their valuations of the company's shares.
The same can't be said for Pluto.
Its foundation train, which is almost complete, has the potential to more than double Woodside's LNG output to around 6.4 million metric tons a year, so any delay would be met harshly by investors. It could also cause reliability concerns with LNG customers at a time when Woodside is trying to secure offtake deals for some of its other LNG developments.
More broadly, the new strike will stoke skill shortage fears as Australia's economy continues its slick recovery and multiple LNG projects get underway.
Despite the new action, Pluto currently remains within market guidance, with a target start-up by end February 2011 and first LNG by end March 2011, Woodside said in a statement.
"However continued industrial action would delay mechanical construction activities and consequently impact the project schedule and cost," it added.
Woodside said it intends to make an application to Australia's national workplace tribunal, Fair Work Australia, to suspend the action.
In November, it increased its cost estimate for Pluto by 6%-10%, partly pinning the increase on a shortage of some skilled labor.
On Sunrise, Ramos-Horta continued to use softer rhetoric on the resource, which straddles Australia and East Timor, than East Timor Prime Minister Xanana Gusmao.
"At face value, without seeing any detailed financial and technical studies of all the options, I would want to see the pipeline coming to Timor Leste because I see the benefits in job creation and (contribution) to our economy," Ramos-Horta told reporters in Canberra.
"But I want to see also the cost of it, both in terms of environmental impact, as well as the financial and commercial cost. I don't support a pipeline out of patriotic duty," he added.
The government "remains open to dialogue" on the issue, Ramos-Horta said.
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