Beach Energy shares experienced a significant drop of 16 per cent in early trading due to news of poor construction at a West Australian plant, resulting in major cost increases and a potential delay of up to a year. The plant, located 370 kilometers north of Perth, is meant to process gas from the onshore Waitsia field. The estimated cost for the construction of the plant has risen to $600-$650 million, which is $150 million more than a revised estimate from a year prior and $250 million greater than the original estimate in late 2020. Waitsia had controversially gained an exemption from the ban on exports of onshore gas.
Beach Energy’s chief executive, Brett Woods, expressed disappointment over the quality issues encountered at the Perth Basin project. The company holds a 50 per cent stake in the project and ongoing quality problems have led to delays as existing onsite labor is redirected to remedy the issues. The need to rebuild compressors and replace valves and piping after pre-startup quality checks further contributed to the delays and cost increases. Beach and its partner, Mitsui, are working on producing updated cost estimates and schedules as a result of the identified quality issues.
The plant at Waitsia is now expected to start up in the September quarter, delaying the project by nine months. The construction contract for the project was originally held by Clough Engineering, which was owned by South African firm Murray & Roberts. However, Clough entered voluntary administration in early 2022 after funding from its parent company was cut off. The future of the project seemed uncertain until Italian construction contractor WeBuild acquired Clough a few months later. Previously, Beach Energy had cut its Perth Basin reserves by 11 per cent due to disappointing drilling results.
Overall, the construction issues at the West Australian plant have led to significant challenges for Beach Energy and its partners. The increased costs and delays in the project startup have impacted the company’s shares negatively, resulting in a significant drop in early trading. Despite efforts to address and rectify the quality issues, the delays and cost increases continue to pose challenges for the project. News of the construction problems highlights the complexities and risks involved in large-scale energy projects and the importance of effective project management and oversight to mitigate such issues in the future.
