Gorgon gas project blows out by $9 billion

The energy company Chevron has announced that costs of its Gorgon gas project off Western Australia have blown out by $9 billion.

The company says the total cost of the LNG project on Barrow Island has increased from $43 billion to $52 billion.

The company cites increased labour costs, logistic challenges on the remote site and weather delays for the blowout.

Chevron says Gorgon has been under construction for three years and is 55 per cent completed.

The company says it is on track to ship its first cargo of LNG from Gorgon in the first quarter of 2015.

Chevron vice chairman George Kirkland says the Gorgon project economics are still attractive.

"While investment requirements have grown, oil prices, which directly impact the overall revenue stream, have increased by approximately 80 per cent over the same time period," he said.

"In addition, the LNG nameplate capacity has increased by four per cent to 15.6 million tones per year." Chevron says through Gorgon it has committed $18 billion to local companies, and have created more than 9,000 jobs around Australia, including 6,000 people working on and around Barrow Island.

Graeme Bethune from advisory firm Energy Quest says the updated cost base better reflects current market conditions.

"The blow out was expected, this increase really just brings Gorgon pretty well in line with the more recent costs announced by the other projects," he said.

"I think what it does indicate is that any that large greenfield LNG development is going to be pretty expensive, whether it's floating or offshore, regardless."

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