The rising cost of exploring and developing oil and gas resources was demonstrated once again last week, with reports that the cost to build two liquefied natural gas (LNG) projects will be even higher than expected.

Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.

Liquefied Natural Gas
Chevron Corporation
(NYSE:CVX) is developing several offshore natural gas fields and building the Gorgon LNG plant in Australia. The cost of this project was originally estimated at $37 billion and several media outlets have reported that Chevron believes the project may cost an additional $21 billion to construct. The additional costs are due to lower productivity, a strong Australian dollar, increased demands from labor unions and the rising costs of local manufacturing. Gorgon LNG is approximately 50% complete and is expected to start up in 2014. It will have annual capacity of 15 million tons.

Exxon Mobil (NYSE:XOM) is building a LNG project in Papua New Guinea as a means to develop the considerable natural gas resources located there. The project will now cost $19 billion to build, approximately 20% more than previous estimates. Exxon Mobil attributed the increase to exchange rate movements, poor weather and disputes with landowners.

The LNG facility in Papua New Guinea is about 70% complete and is expected to start up in 2014. Although the cost is higher than originally planned, Exxon Mobil said the additional cost would be offset by higher LNG prices and more capacity at the plant.

SEE: Oil And Gas Industry Primer

Hess Corporation
(NYSE:HES) has decided to divest the company's oil and gas assets in Russia, as it looks to focus on the United States onshore and other parts of its global portfolio. The Russian properties currently produce approximately 50,000 barrels of oil equivalent per day from several onshore areas. Hess has announced the disposition of two other properties over the last few months, raising approximately $1.5 billion in proceeds.

Exxon Mobil is negotiating to end its involvement with the first phase of the redevelopment of the West Qurna field in Iraq. The company was awarded the concession on this field along with Royal Dutch Shell (NYSE:RDS-A, RDS-B) in 2009.

Exxon Mobil is also involved with oil and gas exploration and development in Kurdistan, a semi-autonomous region in northern Iraq. The company's efforts here are generating conflict with Iraq's central government, which views agreements signed with Kurdistan as illegal.

Hi-Crush Partners LP (NYSE:HCLP) was one of the final companies in the energy sector to report earnings last week for the third quarter of 2012 While the company was profitable during the quarter, it also reported the termination of a major contract with Baker Hughes (NYSE:BHI) to supply sand used in hydraulic fracturing. The loss of the contract led to a 30% decline in the stock price for Hi-Crush Partners LP.

SEE: A Guide To Investing In Oil Markets

The Bottom Line
Some things never change and the rising costs needed to explore and develop for oil and gas seems to be one of these. This was confirmed last week with commentary from two of the world's largest integrated oil operators.

At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  5. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  6. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  7. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  8. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  9. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  10. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!