BHP warns of big cost overruns in key projects
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Your support makes all the difference.BHP Billiton warned yesterday that two of its biggest extraction projects were running at least 30 per cent over budget, landing it with an additional $732m (£400m) bill.
The impact of last year's US hurricane season has sent the cost of a joint project between BP and BHP Billiton to extract oil from the Gulf of Mexico rocketing after much of the equipment used by oil groups was destroyed.
BHP Billiton warned its $1.1bn Atlantis South oil project was facing months of delays. Its $1.34bn nickel project in Western Australia has also run into trouble, costing the world's biggest mining company $402m more than it had budgeted.
"Market conditions in Australia and the Gulf of Mexico are particularly tight. Cost pressures are likely to result in a capital cost increase of more than 30 per cent in excess of the currently approved budget for both projects," it warned in its latest quarterly trading update.
BHP Billiton has a 46 per cent stake in Atlantis South, which will be its biggest oil project in the US, and BP, the operator, has the rest. Once the oilfield comes on stream, it will have the capacity to produce 200,000 barrels of oil a day and 180 million cubic feet of gas a day.
Tony Hayward, BP's head of exploration, said the setback would push the projected start-up date into early next year from this autumn. Lord Browne, BP's chief executive, described the delay as "small". BHP Billiton warned that its US delay meant its crude oil and condensate output for 2007 was likely to be flat on 2006, compared with analysts' previous expectations that volumes would rise by 13 per cent.
In the quarter to 20 June, it said oil and condensate production had fallen by 17 per cent to 11.6 million barrels, blaming the decrease in part on lost production after last year's hurricanes. Total fiscal 2006 petroleum output was 116 million barrels of oil equivalent (boe), in line with its earlier forecast for output at the lower end of a range between 115 million and 125 million boe.
There was better news elsewhere from the Australian miner, which reported record production volumes of aluminium, copper, iron ore, nickel and natural gas. Volumes rose on the back of China's march into the industrial age, which has pushed up prices of raw materials to record levels. Iron production rose 3 per cent in the quarter; copper production climbed 16 per cent; nickel output soared by 31 per cent.
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