Australian LNG firm Woodside has raised the cost estimate for its Scarborough gas project by 5 percent as it looks to take a final investment decision later this year.
Woodside said in a statement on Wednesday the Scarborough project would now cost $12 billion.
This includes $5.7 billion for the offshore component and $6.3 billion for the onshore component, it said.
Compared to the previous estimate, the costs for the onshore component rose 3 percent, including modifications to Pluto LNG Train 1 to enable processing of Scarborough gas.
In addition, costs for the offshore component increased 8 percent, including a rise in offshore production capacity from 6.5 Mtpa to 8 Mtpa of LNG and an additional well.
The Scarborough gas resource is located in the Carnarvon Basin, about 375 km west/north-west of the Burrup Peninsula in Western Australia.
The Australian firm said refreshed pricing from major contractors “underpins the updated cost estimate, and reflects Woodside’s work with them since 2020 to maximise the value of the project by optimising design and execution planning, and increasing offshore processing capacity.”
The expected internal rate of return of the integrated Scarborough and Pluto Train 2 development is greater than 12 percent, according to Woodside.
It has a globally competitive cost of supply of about $6.8/MMBtu to north Asia and Woodside expects to deliver the first cargo in 2026.
“Transformational” project
Woodside Acting CEO Meg O’Neill reaffirmed that the Scarborough development is a “transformational” project that would deliver “enduring shareholder value.”
O’Neill said the firm made “significant progress” towards the targeted final investment decision on Scarborough and Pluto Train 2 this year.
She added the cost update includes “value-accretive scope changes” to deliver an approximately 20% increase in offshore processing capacity and to modify Pluto Train 1 to allow increased Scarborough gas processing.
It also reflects the work undertaken with Woodside’s contractors to optimise the execution schedule and manage costs in preparation for FID.
“Woodside’s contracting strategy for Scarborough reduces cost risk, with approximately 90% of total project contractor spend structured as lump-sum and fixed rate agreements,” O’Neill said.
“We have commenced the formal processes for selling down our interest in Pluto Train 2 and Scarborough as we target the investment decision later this year and these processes are supported by the updated cost estimate,” she said.