(EnergyAsia, July 17 2012, Tuesday) — Relations between the two Australian partners developing natural gas reserves in the Bass Strait have soured after the latest cost blow-out means the project could exceed the original A$360 million budget by over 60%. (US$1=A$0.98).

AWE Energy, with a 46.25% stake, has slammed operator and 42.5% owner Origin Energy in the increasingly troubled BassGas joint venture for the project’s second A$100 million cost blowout in three months. Japanese trading house Toyota Tsusho owns the remaining 11.25%.

The joint venture is enhancing the Yolla gas field, off Victoria state with the aim of boosting its production to supply the increasingly tight southeastern Australian market.

The Australian partners reported that Origin has had to revise its development plan after failing to install a compression module as planned. As part of the upgrade, Yolla was to have been converted to a manned platform equipped with an export compression and condensate pumping modules.

Blaming stormy weather conditions in the Bass Strait for holding up the upgrading work, Origin’s upstream CEO Paul Zealand said Yolla will return to its “usual free flow production mode.”

AWE Energy estimates that the change in project plan will raise the project budget by between A$90 and A$120 million, lifting the total budget to A$550 to A$580 million.

In criticising Origin Energy’s “extremely disappointing” performance, AWE’s managing director, Bruce Clement, said:

“The additional capital costs and project delays reported by the operator are extremely disappointing and AWE is looking at opportunities for reducing the impact of these cost overruns.

“In light of the history of the project and this schedule delay and budget increase, AWE continues to be very disappointed with the project delivery performance by the operator.

“However, despite these issues, which have impacted AWE in the short term, we remain confident in the future value and potential of the asset.

“With additional potential oil reserves in the Upper EVCM and strengthening East Coast gas markets, we are confident that BassGas will deliver significant long term value to AWE shareholders.”

Disputing AWE’s estimate, Origin said the project cost would rise by A$30 million to A$490 million.