E&D Rpt Q/E 30 June 2003
BHP Billiton Limited
24 July 2003
BHP Billiton Limited is issuing this announcement to fulfil disclosure
obligations arising from its secondary listing on the London Stock Exchange.
The text of this release is identical to that issued by BHP Billiton Plc
earlier.
Date 24 July 2003
Number 25/03
BHP BILLITON QUARTERLY REPORT ON EXPLORATION
AND DEVELOPMENT ACTIVITIES
April 2003 - June 2003
This report covers exploration and development activities for the quarter ended
30 June 2003. Unless otherwise stated, BHP Billiton's interest in the projects
referred to in this report is 100 per cent, and references to quarters are based
on calendar years.
Of the 16 projects currently in development, all are either on or under budget
and fifteen are currently tracking on or ahead of schedule.
PETROLEUM DEVELOPMENT
Atlantis Development, Gulf of Mexico, USA (BHP Billiton 44%, non-operated)
BHP Billiton completed full capital allocation for the Atlantis project in
February 2003. Our share of total project expenditure is US$1.1 billion. During
the quarter, fabrication of the facilities topsides started at McDermott's
shipyard in Louisiana. The project remains on budget and on schedule for first
production in the third quarter of 2006.
OHANET Development, Algeria (BHP Billiton 45%, joint operating organisation
comprising BHP Billiton/SONATRACH)
The OHANET Development consists of the development of four gas-condensate
reservoirs in the Illizi Basin in southern Algeria. The project will provide a
gas treatment facility with a capacity of 20 million standard cubic metres per
day fed by 47 production wells, of which 32 will be new and 15 will be
re-completions of existing oil producers. 3D seismic data across all reservoirs
has been processed and incorporated into the reservoir models. By the end of
June 2003 a total of 28 new wells had been drilled and completed and 15 existing
wells had been re-completed. The last four wells have been deferred to allow
three to four years of production history to be gathered. Construction is
essentially complete and the plant is undergoing commissioning and testing
before being brought into production. First production is scheduled for the
third quarter of 2003, and BHP Billiton's share of capital expenditure is US$464
million.
Mad Dog Development, Gulf of Mexico, USA (BHP Billiton 23.9%, non-operated)
BHP Billiton announced its sanction of the Mad Dog field, approving up to US$335
million for development of the Gulf of Mexico oil and gas field. Construction is
progressing on the hull (in Finland) and topsides (in the USA), with an
estimated 50 per cent of the work complete at the end of June 2003. Drilling was
completed on the four pre-drill development wells during the quarter. The
project is on budget, and first production remains on schedule for the end of
calendar year 2004.
Greater Angostura Development, Trinidad (BHP Billiton 45%, operated)
In March 2003, BHP Billiton announced sanction of the first development phase of
the Greater Angostura oil and gas field off the northeast coast of Trinidad.
Phase one of the development involves engineering, construction and installation
of production and transportation facilities required to recover the oil reserves
of the field. The partners have also approved the project. During the quarter,
site work began on the onshore oil storage terminal. Evaluation, negotiation and
award of contracts for fabrication and construction work continues, as well as
planning and other preparations for the facilities, subsea, transportation and
other aspects of this project. BHP Billiton's share of capital expenditure for
the first phase is expected to be around US$327 million. First oil is scheduled
for the end of calendar year 2004.
North West Shelf expansion, Australia (BHP Billiton 16.67%, non operated)
Overall progress on the fourth liquefaction processing train is 71 per cent
complete and remains on schedule to start up in mid 2004. All major equipment is
on site and construction is 43 per cent complete. With the commencement of
pipelay, the second trunkline is progressing as planned at 57 per cent complete.
BHP Billiton's share of capital expenditure is US$237 million.
ROD Integrated Development, Algeria (BHP Billiton 36.04%, joint operating entity
comprising BHP Billiton/SONATRACH)
The ROD Integrated Development consists of the development of six satellite
oilfields in the Berkine Basin in eastern Algeria. The project will produce
80,000 barrels of Sahara Blend crude oil per day, with associated gas being
reinjected into the reservoir together with water to provide pressure support to
the reservoir. 36 development wells will be required, 10 of which will be
recompletions of already drilled wells. At the end of June 2003, 17 new
development wells had been completed and the 18th was nearing completion.
Procurement of all major equipment is complete. Erection of the piperack
steelwork is well advanced and tank farm construction is underway. Overall
project progress is 61 per cent complete. First production is scheduled for the
end of first quarter 2004 and BHP Billiton's share of capital expenditure is
US$192 million.
Minerva (BHP Billiton 90%, operated)
Work is progressing under a Lump Sum Turn Key contract awarded to a joint
venture comprising McConnell Dowell Constructors (Australia) and Saipem
(Portugal) for engineering and construction of the pipeline and gas plant
facilities. The offshore drilling and completion of the two new subsea wells has
been successfully completed and civil engineering works are progressing on the
gas plant site near Port Campbell. Work is continuing on the horizontally
directionally drilled pipeline shore crossing, and the onshore pipeline is now
largely complete. The installation of the offshore pipeline is scheduled for the
fourth quarter of 2003. The project remains on budget (BHP Billiton's share of
capital expenditure is US$123 million). Some delays have been experienced
against the project's original schedule, where first gas production was expected
in the first quarter of 2004.
Caesar/Cleopatra Transportation Systems, Gulf of Mexico, USA (BHP Billiton
interest in Caesar pipeline, 25%; interest in Cleopatra pipeline, 22%.
Non-operated)
BHP Billiton acquired a 25 per cent interest in the Caesar oil pipeline and a 22
per cent interest in the Cleopatra gas pipeline which will transport product
from the Mad Dog and Atlantis fields to pipelines closer to shore. The shallower
portions of the deepwater pipe lay have been completed, with the pipe to a third
party facility and the spur to Mad Dog set during the quarter. Installation of
the deeper water section of the pipe is in progress. The project is on budget
(BHP Billiton's share of the capital cost is estimated at US$100 million) and on
schedule to commence operation coinciding with first production from the third
party facilities in advance of first hydrocarbon production from Mad Dog and
Atlantis.
Zamzama Field Development, Pakistan (BHP Billiton 38.5%, operated)
Phase 1 of the development of the Zamzama Gas Field is complete. The new plant
has been commissioned approximately four months ahead of schedule. The gas plant
is operating to specification and gas is being delivered to customers as per the
contractual arrangements. Three new wells, Zamzama-3, Zamzama-4 and Zamzama-5
were drilled during this phase and these are tied into two new 140 MMcf/d
processing trains. A fourth well, Zamzama North, designed to further appraise
the field is nearing completion. BHP Billiton's share of total project capital
expenditure is US$40 million, and final costs are expected to be under budget.
MINERALS DEVELOPMENT
Aluminium
Mozal 2 Expansion, Mozambique (BHP Billiton 47.11%)
Construction work on the 253,000 tonne per annum Mozal II aluminium smelter
project continued during the quarter and at the end of June, all process related
systems had been handed over to the smelter operations team. Process
commissioning is proceeding well with 50% of the second potline now producing
aluminium. Full production is now expected to be reached by the end of the third
quarter of 2003. Cost trends to date indicate that the project is likely to be
completed well below the project budget of US$860 million (BHP Billiton share
US$405 million).
Hillside Expansion
Main construction work on the 130,000 tonne per annum Hillside III aluminium
smelter project commenced on 1 April 2002, and at the end of June 2003 overall
construction work has reached 72 per cent completion. All building construction
work is now completed. Manufacture and installation of process equipment is
progressing ahead of schedule. First metal production from the new potline
facilities is now expected in the fourth quarter of 2003, and full production is
expected towards the end of the first quarter 2004. Expenditure to date remains
in line with the budgeted US$449 million.
Base Metals
Escondida Norte, Chile (BHP Billiton 57.5%)
The development of the Escondida Norte pit, located approximately 5 kilometres
north of the existing Escondida mining operations, was approved in June 2003 as
part of Escondida's operating strategy to maintain copper production capacity in
future years. The development will include pre-stripping of overburden, and the
construction of infrastructure to support mining and crushing/conveying of the
ore to the existing Escondida processing plants, which will also continue to
receive ore from the existing mine. Combined proved and probable reserves of
sulphide ore are estimated at 502 million tonnes of sulphide ore at an average
copper grade of 1.44%, and a cut off grade of 0.7%, giving an ore reserve life
of approximately 17 years. Ore reserves have been revised since last published
in our news release of 16 June 2003, where proved and probable reserves were
estimated at 526 million tonnes of sulphide ore at an average copper grade of
1.42% and a cut off grade of 0.7%. This revision has no material impact on
estimated project life or investment returns.
Development costs are estimated at US$400 million (BHP Billiton share US$230
million). The first copper production from the Norte open pit is scheduled for
the fourth quarter of 2005.
Carbon Steel Materials
Products & Capacity Expansion Project (PACE), Australia (BHP Billiton 85%)
The project provides for the upgrade of the BHP Billiton rail and port
facilities in a staged process to meet forecast increases in sales of iron ore.
The estimated capital cost for Stage 1 is US$351 million (BHP Billiton share
US$299 million).
Detailed engineering is complete and construction work continues on schedule.
The project is within budget and is on track to commission ahead of schedule in
the first quarter of 2004.
Mining Area C Project, 'C Deposit', Australia (BHP Billiton 85%)
The project provides for the development of a mine, processing plant, 38
kilometre rail spur and associated infrastructure for an operation to build up
to 15 Mtpa at Mining Area C, which is situated approximately 120 kilometres from
Newman in Western Australia's Pilbara region. The capital cost is estimated to
be US$213 million (BHP Billiton share US$181 million).
Construction work is progressing at both the plant and infrastructure rail and
road sites, and is over 80 per cent complete. Extraction of bulk sample material
is complete. Overall the project is within budget and remains on schedule to
commission in the fourth quarter of 2003.
Dendrobium Coal Project, Australia
The Dendrobium Mine will be a low cost underground longwall operation capable of
producing 5.2 Mtpa of raw coal (3.6 Mtpa of clean coal). The main customer for
the coking coal is the Port Kembla steelworks, which is located seven kilometres
from the mine site.
Construction activities associated with the mine surface facilities and
ventilation shaft are essentially complete. Commissioning of the coal loading
facilities (Kemira Valley) is currently scheduled to commence next month.
Construction associated with the washery upgrade and the thermal drier
installation is currently ramping up. The project is approximately 33 per cent
complete with underground coal drivage and conveyor belt installations well
underway.
Just over 55 per cent of the project's capital has been committed to date. The
capital forecast remains unchanged at US$170 million. Forecast longwall
commencement is tracking ahead of schedule and is expected in the first quarter
of 2005.
Energy Coal
Mount Arthur North, Australia
The Mount Arthur North Mine will be capable of producing up to 15 million tonnes
of raw thermal coal per annum when full production is achieved in 2006. The
project is proceeding to schedule with coal deliveries to Macquarie Generation
commencing on 2 January 2003. During the period to June 2003, product was
supplied to both the export and domestic thermal coal markets in line with the
ramp up plan. Construction activities on the export coal facilities and coal
preparation plant remain on schedule. Some components are currently undergoing
pre-commissioning and commissioning.
The project is progressing to plan and forecast cost to completion is within the
approved budget of US$411 million.
Mount Arthur North, Australia
The Mount Arthur North Mine will be capable of producing up to 15 million tonnes
of raw thermal coal per annum when full production is achieved in 2006. The
project is proceeding to schedule with coal deliveries to Macquarie Generation
commencing on 2 January 2003. During the period to June 2003, product was
supplied to both the export and domestic thermal coal markets in line with the
ramp up plan. Construction activities on the Export coal facilities and coal
preparation plant remain on schedule. Some components are currently undergoing
pre-commissioning and commissioning.
The project is progressing to plan and forecast cost to completion is within the
approved budget of US$411 million.
PETROLEUM EXPLORATION
Exploration and appraisal wells drilled during the quarter or in the process of
drilling as at 30 June 2003.
WELL LOCATION BHP BILLITON EQUITY STATUS
Howler-1 Trinidad Block 2(c) 64.29% BHP Billiton operator Drilling ahead.
Hywel-1 P709, Block 110/12b, 20% BHP Billiton; Plugged and abandoned.
East Irish Sea Basin Burlington Resources operator
Skiddaw-1 Western Australia, Exmouth 50% BHP Billiton operator Hydrocarbons encountered. Plugged
Basin, and abandoned.
WA-255-P
Skiddaw-2 Western Australia, Exmouth 50% BHP Billiton operator Hydrocarbons encountered. Plugged
Basin, and abandoned.
WA-255-P
Stybarrow-2 Western Australia, Exmouth 50% BHP Billiton operator Hydrocarbons encountered. Plugged
Basin, and abandoned.
WA-255-P
Maginnis-1 Western Australia, Browse 33.3% BHP Billiton Plugged and abandoned. Released
Basin, WA302-P operator rig on 5 April 2003.
Egret-3 Western Australia, North 16.67% BHP Billiton; Successful oil appraisal.
West Shelf, Non-commercial gas encountered.
WA-10-R Woodside operator Plugged and abandoned
Carteret-1 Western Australia, North 16.67% BHP Billiton; Woodside Continuing.
West Shelf, operator
WA-4-L
Chinook-3 Gulf of Mexico, 40% BHP Billiton operator Temporarily abandoned. For
further information see News
Walker Ridge 469 Release of 30 June 2003.
Tiger-1 Gulf of Mexico, Green 100% BHP Billiton operator Drilling ahead.
Canyon 195
Champlain-4 Gulf of Mexico, Atwater 12.5% BHP Billiton; Unocal Temporarily abandoned.
Valley 63 operator
Santa Rosa-1 Gulf of Mexico, Atwater 25% BHP Billiton; Kerr McGee Plugged and abandoned.
Valley 83 operator
MINERALS EXPLORATION
The exploration group of BHP Billiton Minerals continued to pursue global
exploration opportunities for key commodities of interest to the group utilising
both the Junior Alliance Program and in house generative capabilities. In line
with this strategy, BHP Billiton purchased Hunter Exploration Group's minority
20% and 14% participating interests in the Aviat and Churchill Diamond Joint
Ventures in Canada.
At the end of June 2003, BHP Billiton entered into an agreement with Diamond
Mines Australia, a subsidiary of Gravity Capital, to explore for diamondiferous
Kimberlite pipes in Australia using the FALCONTM airborne gravity technology.
BHP Billiton has a 6.1% interest in Diamond Mines Australia and has back-in
rights to a majority interest position in significant discoveries made as a
result of this initiative.
Pursuit of global exploration opportunites and use of FALCONTM technology by the
exploration group has led to continued growth and diversification in the
exploration portfolio and increased the quality of exploration opportunities.
The three BHP Billiton FALCONTM airborne gravity platforms were active in flying
projects for both BHP Billiton and its partner companies in Australia, South
America and Africa.
EXPLORATION EXPENDITURE
Information related to exploration expenditure will be included in the BHP
Billiton full year results, to be released on 28 August 2003. It is expected
that gross exploration expenditure will be in line with previous forecast.
The information in this report that relates to Escondida Norte Ore Reserves is
based on information compiled by Dr Jonathan M. Gilligan Ph.D., B.Sc. (Hons),
FGS, MAusIMM, who is a Member of the Australian Institute of Mining and
Metallurgy and is a full time employee of Minera Escondida Ltda. Dr Gilligan has
sufficient experience, which is relevant to the style and type of deposit and to
the activity that he is undertaking to qualify as a Competent Person as defined
in the 1999 edition of the 'Australasian Code for Reporting of Minerals
Resources and Ore Reserve'. The Competent Person consents to the inclusion in
this report of the matters based on their information in the form and context in
which they appear.
Further information on BHP Billiton can be found on our Internet site:
http://www.bhpbilliton.com
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