PERTH (miningweekly.com) - Energy major Origin Energy has warned of a near $2-billion cost blow-out at its Australia Pacific liquefied natural gas (APLNG) project.

A review of the APLNG project upped the estimated price from $23-billion to $24.7-billion.

“The increase in cost reflected increased certainty around well and gathering locations for gas for Train 2, enabling more accurate cost estimates, changes to the coal seam gas water management scope to align with revised government policy, cost increases for third-party LNG projects in which APLNG has an interest, and an increased allowance for project contingency,” said Origin MD Grant King.

Based on the projected costs, Origin expected its funding requirements for the nine-million-ton-a-year APLNG project to peak at $4.4-billion, up from the previously advised $3.6-billion.

“Origin’s current committed undrawn facilities, together with operating cash flow, provide sufficient liquidity to cover its APLNG funding commitment and the requirements of Origin’s existing business, without the need for refinancing until the 2015 financial year,” he said.

Additionally, the review concluded that Train 1 was on track to be completed on or ahead of schedule, with first LNG cargo expected by mid-2015. Train 2 was expected to be completed at least three months earlier than scheduled, with start-up expected in the fourth quarter of 2015.

Meanwhile, Origin on Thursday announced that underlying profits for the first half of its financial year had declined by 26%, to $362-million, while underlying earnings before interest and tax were down by 16% to $698-million.

Origin chairperson Kevin McCann said earnings were affected by more challenging market conditions during the first half of the year, as well as higher depreciation and amortisation charges, and an increase in underlying net financing costs.

“The first half of the financial year was characterised by more challenging operating conditions in the energy markets segment, which has impacted profit and cash flow.

“The fundamentals of this business remain strong. We have taken steps to deal with the regulatory and market dynamics which have affected our results during the first half, and which we expect will benefit the 2014 financial year,” he said.

McCann said the company’s major focus continued to be the delivery of the APLNG project, which was now some 30% complete.