Joint venture partners Mitsui E&P Australia (Mepau) and Beach Energy have been forced to re-evaluate their A$770 million (US$511 million) Waitsia Stage 2 gas project onshore Australia as the tight labour market in Western Australia has impacted construction progress.

“… the tight labour market in Western Australia in particular has impacted construction progress at the Waitsia gas plant to create a range of uncertainty in outcomes that means Beach no longer considers it prudent or appropriate to maintain its previously targeted schedule and capital estimates,” Australian indie Beach said on Thursday.

“Review of cost and schedule by the Waitsia joint venture operator [Mepau] and Webuild is ongoing to identify and implement opportunities to mitigate impacts on the project and constrain the range of uncertainty.”

Waitsia Stage 2 had been targeting start-up later this year.

There had already been a question mark over the project’s completion when engineering, procurement and construction contractor Clough went into administration, but earlier this year the Waitsia partners reached agreement with Clough’s Australian assets acquirer Webuild to complete the work.

The Waitsia Stage 2 project in the Perth basin involves further development of the onshore gas field with more wells and a new production facility capable of producing 250 terajoules per day. Development drilling was completed in 2022 and first gas had been anticipated by the end of 2023.

On top of its domestic gas supply commitments, Waitsia’s gas was to be used as feedstock at the Woodside Energy-operated North West Shelf liquefied natural gas plant. UK supermajor BP last year agreed to purchase all of Beach’s estimated 3.75 million tonnes of LNG from Waitsia Stage 2 over approximately five years.

Mepau noted that the new Waitsia gas processing plant would draw from up to eight production wells phased over a 15-year life cycle with volumes first entering the Dampier to Bunbury gas pipeline.

Waitsia Stage 1 was essentially an extended well test featuring the Waitsia-01 and Senecio-03 well connected to the refurbished Xyris production facility. Stage 1 supplied about 10 TJ per day of gas for over three years to December 2019.

The project was subsequently expanded with the connection of another well — Waitsia-02 — to boost production and that expansion saw the installation of a pipeline from Xyris to the nearby Dampier to Bunbury pipeline.

Since August 2020, Stage 1 has been supplying about 20 to 30 TJ of gas every day, according to Mepau.

Beach added that the Waitsia project remains strongly value accretive and a key element in the company’s future growth and it would provide an update when the review into the project’s cost and schedule is concluded.