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BIL
BIBLT
BHP Billiton quarterly report on exploration and development activities
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
JSE Code: BIL
ISIN: GB0000566504
25 July 2006
BHP BILLITON QUARTERLY REPORT ON EXPLORATION AND DEVELOPMENT ACTIVITIES
April 2006 - June 2006
This report covers exploration and development activities for the quarter
ended 30 June 2006. Unless otherwise stated, BHP Billiton"s interest in
the projects referred to in this report is 100 per cent, and references to
project schedules are based on calendar years.
During the quarter, the Board approved the development of the Shenzi oil
and gas field in the Gulf of Mexico (USA) and the Koala Underground Project
at the EKATI diamond operation (Canada). This brings to seven the total
number of major projects approved during the 2006 financial year for an
estimated cost of US$5.1 billion (BHP Billiton share).
The Worsley Development Capital Projects (Australia) and the Rapid Growth
Project 2 (Australia) were commissioned and the Escondida Sulphide Leach
Project (Chile) achieved first production during the quarter.
Cost and capacity pressures continued during the final quarter of the 2006
financial year. Tight labour markets and shortages of equipment and
supplies have driven up costs and in some instances impacted project
schedules. Currency strength against the US dollar has added further
pressure. Market conditions in Australia and the Gulf of Mexico are
particularly tight and are impacting both existing projects and our plans
to execute new growth projects in these regions. Specifically, the
Ravensthorpe Nickel Project in Western Australia and the Atlantis South
Development in the Gulf of Mexico are experiencing cost pressures more than
30 per cent in excess of approved budgets. As a result, a detailed review
of the Ravensthorpe schedule and budget commenced during the quarter. The
Atlantis South Development schedule remains under review following last
year"s hurricanes in the Gulf of Mexico. Assuming Atlantis first oil in
quarter one of 2007, total production for the Petroleum Customer Sector
Group for the 2007 financial year is expected to be in line with the 2006
financial year. Most other projects remain broadly on schedule with some
minor delays being experienced in Australia.
PETROLEUM DEVELOPMENT
Atlantis South Development, Gulf of Mexico, USA (BHP Billiton 44%, non-
operated)
In February 2005, BHP Billiton approved a revised budget of US$1.1 billion
for the development of the Atlantis South oil and gas reserves. The project
continues to experience cost and schedule pressure as a result of heated
market conditions and additional quality assurance and regulatory
certification processes in response to last year"s Gulf of Mexico hurricane
season. Cost pressures are likely to result in a capital cost increase of
more than 30 per cent in excess of the currently approved budget. This
development will have a gross nameplate daily capacity of 200,000 barrels
of oil and 180 million cubic feet of natural gas. During the quarter, final
integration work continued and US Coast Guard inspections of the facility
were conducted in preparation for sail out. Drilling and completion of the
development wells also continued. Overall project progress is approximately
80 per cent. The project schedule remains under review. A detailed review
of cost estimates continues as the project schedule firms.
North West Shelf Expansion, Australia (BHP Billiton 16.67%, non-operated)
In June 2005, BHP Billiton approved an expansion to the liquefied natural
gas (LNG) processing facilities at the North West Shelf Project in
Australia. The project includes the construction of a fifth liquefaction
processing train with a gross annual capacity of 4.2 million tonnes,
additional processing facilities and associated infrastructure. The project
is progressing as per schedule with all major construction contracts now
awarded. BHP Billiton"s share of development costs, based on the
operator"s estimate, is approximately US$250 million with first production
expected by late 2008. The project cost and schedule are under review.
Neptune Development, Gulf of Mexico, USA (BHP Billiton 35%, operated)
In June 2005, BHP Billiton approved the Neptune oil and gas development
located in the Gulf of Mexico. The project includes the construction,
installation and operation of a stand-alone platform and the associated
seven well subsea system. The facility will have a gross nameplate daily
capacity of 50,000 barrels of oil and 50 million cubic feet of gas. During
the quarter, drilling of development wells began and fabrication of the
platform piles and tendons also commenced at a construction yard in Texas,
USA. Development costs are estimated at US$850 million (BHP Billiton share
US$300 million) with first production expected by the end of 2007.
Stybarrow Development, Australia (BHP Billiton 50%, operated)
In November 2005, BHP Billiton approved the Stybarrow oil field development
located off the north-west coast of Australia. The project involves a
subsea development and a Floating Production Storage and Offtake (FPSO)
facility with a gross daily capacity of approximately 80,000 barrels of
liquids, which will be provided under a 10 year service agreement. Vessel
hull block and accommodation fabrication activities are continuing and the
cutting, blasting and painting of topsides has commenced. Project costs are
estimated at US$600 million (BHP Billiton share approximately US$300
million). First production is expected during the first quarter of 2008.
North West Shelf Angel Development, Australia (BHP Billiton 16.67%, non-
operated)
In December 2005, BHP Billiton approved the development of the North West
Shelf Venture"s Angel gas and condensate field off the north-west coast of
Australia. The project involves the installation of the Venture"s third
major offshore production platform and associated infrastructure, including
a new subsea 50 kilometre pipeline which will be tied into the North Rankin
platform. Hydrocarbons will be produced through one processing unit with a
gross daily capacity of up to 800 million standard cubic feet of gas and
associated condensate. All major contracts have now been awarded.
Engineering and procurement activities continued during the quarter. BHP
Billiton"s share of development costs, based on the operator"s estimate, is
approximately US$200 million. The development is expected to be fully
operational by the end of 2008.
Shenzi Development, Gulf of Mexico, USA (BHP Billiton 44%, operated)
In June 2006, BHP Billiton approved the development of the Shenzi oil and
gas field located in the Gulf of Mexico. The project includes the
construction, installation and operation of a stand-alone platform and the
associated subsea system. Initial field development will consist of seven
producing wells and the full field development is expected to have up to 15
wells. The facility will have a gross nameplate daily capacity of 100,000
barrels of oil and 50 million cubic feet of gas. Gross costs for the full
field development through 2015 are estimated at US$4.4 billion (BHP
Billiton share US$1.94 billion) with first production expected by mid 2009.
MINERALS DEVELOPMENT
Aluminium
Worsley Development Capital Projects (DCP), Australia (BHP Billiton 86%)
The Worsley Alumina DCP was approved in May 2004 with a budget of US$192
million (US$165 million BHP Billiton share) and will increase alumina
capacity by 250,000 tonnes per annum to 3.5 million tonnes per annum (100%
basis). The project is now mechanically complete with commissioning in
progress and additional production ramping up. As a result it will no
longer be included in this report. The cost to completion is currently
being finalised, however is expected to be close to budget.
Alumar Refinery expansion, Brazil (BHP Billiton 36%)
The Alumar Refinery expansion was approved in December 2005 with a budget
of US$518 million (BHP Billiton share). The project includes upgrades to
the existing production unit and duplication of the upgraded line and will
increase alumina capacity by 2 million tonnes per annum to 3.5 million
tonnes per annum (100% basis). Detailed engineering, procurement and
construction continued during the quarter. Commissioning is expected to be
completed in mid 2008.
Base Metals
Escondida Sulphide Leach, Chile (BHP Billiton 57.5%)
The Escondida Sulphide Leach Project was approved in April 2004. The
project will produce 180,000 tonnes (103,500 tonnes BHP Billiton share) of
copper cathode per annum, utilising a bacterially assisted leaching process
on low-grade run-of-mine ore from both the Escondida and Escondida Norte
pits. The resulting solutions will then be treated in conventional solvent
extraction and electrowinning plants. During the quarter, leach pad
irrigation continued with approximately 21 million tonnes of ore under
irrigation. Performance testing of the desalination plant was completed and
the solvent extraction and electrowinning plants are undergoing mechanical
commissioning. First cathode was produced on 28 June 2006 and as a result
this project will no longer be included in this report. Project costs are
currently being finalised, however are expected to be close to the budget
of US$870 million (US$500 million BHP Billiton share) excluding foreign
exchange impacts of the stronger Chilean peso.
Spence, Chile
The Spence Project, approved in October 2004, will be a new open cut mine
with associated plant facilities capable of producing 200,000 tonnes per
annum of copper cathode through a combination of chemical and bacterial
leaching. During the quarter mine pre-strip operations proceeded to
schedule and the first low grade oxide mineralisation was placed on the
dump leach pad. Liner placement for the heaps and ponds was effectively
completed with hydrostatic testing continuing. Major mechanical and
structural erection works were completed and electrical and plant piping
installation continued. Initial pre-commissioning testing commenced with
electrical rooms and sub stations being energised. Site wide communication
was achieved between control rooms and electrical switch rooms. The project
remains within the budget of US$990 million excluding foreign exchange
impacts of the stronger Chilean peso. Production is on schedule to begin
during the last quarter of 2006.
Carbon Steel Materials
Rapid Growth Project 2, Australia (BHP Billiton 85%)
The Rapid Growth Project 2 (RGP2) was approved in October 2004. The project
comprises increases in mine, rail and port capacity through the development
of Ore Body 18 (OB 18), purchase of additional rolling stock and a new car
dumper at Finucane Island. Site activities are essentially complete. First
ore was railed from OB 18 on 7 May 2006. Wet commissioning of the new car
dumper also started during the quarter as planned. The project will
increase installed capacity at Western Australian Iron Ore by 8 million
tonnes per annum by the second half of 2006 (this will be offset by an 8
million tonnes per annum reduction in capacity due to the suspension of the
Goldsworthy ship loading operations at Finucane Island in the third quarter
of 2006, related to the Rapid Growth Project 3). As this project has
successfully been completed it will no longer be included in this report.
The cost of completion is currently being finalised however is expected to
be in line with the budget of US$575 million (BHP Billiton share US$489
million).
Rapid Growth Project 3, Australia (BHP Billiton 85%)
The Rapid Growth Project 3 (RGP3) was approved in October 2005. The
project will comprise expansions to mine, rail and port facilities.
Installed capacity at Western Australian Iron Ore"s Area C mine will
increase by 20 million tonnes per annum by the fourth quarter of 2007, and
the project will also deliver some latent capacity at the port to be
utilised in future expansions. Engineering and procurement activities are
nearing completion, with initial construction activities proceeding to
plan. Development costs are estimated at US$1.5 billion (US$1.3 billion
BHP Billiton share).
Samarco Third Pellet Plant Project, Brazil (BHP Billiton 50%)
The Samarco Third Pellet Plant Project was approved in October 2005. The
project will increase annual iron ore pellet production capacity by 7.6
million tonnes to 21.6 million tonnes per annum (100% basis). The new
facilities will include additional mining capacity and a new concentrator
at the Germano site, a 400 kilometre slurry pipeline from Germano to Ponta
Ubu and a third pellet plant, additional stockyard and enhanced shiploading
capacity at the Ponta Ubu site. Detailed engineering and procurement are
proceeding and construction activities have commenced at Germano, Ubu and
on the pipeline. The project budget is US$1.18 billion (US$590 million BHP
Billiton share). Production is scheduled to commence during the first half
of 2008.
Diamonds and Specialty Products
Koala Underground Project, Canada (BHP Billiton 80%, operated)
In June 2006, BHP Billiton approved the development of the third
underground mine at the EKATI diamond mine in Canada. In addition to the
mine development, the investment provides for mine ventilation systems, an
underground conveyor connecting to the existing Panda underground conveyor
and minor surface infrastructure and mobile equipment. The project will
deliver a total of 10.6 million dry tonnes of ore to the process plant and
recover 9.8 million carats of high quality Koala diamonds over an 11 year
period. Total development costs are estimated at US$250 million (BHP
Billiton share US$200 million). First production is expected in the last
quarter of 2007.
Stainless Steel Materials
Ravensthorpe Nickel Project, Australia
The Ravensthorpe Nickel Project was approved in March 2004 and following a
review of project costs completed in August 2005, a revised budget of
US$1,340 million was authorised. The project continues to experience cost
and schedule pressure as a result of the heated market in Western
Australia. Cost pressures are likely to result in a capital cost increase
of more than 30 per cent in excess of the currently approved budget. A
detailed review of both the cost estimate and delivery schedule commenced
during the quarter. The project includes the development of a mine,
treatment plant and associated infrastructure near Ravensthorpe in Western
Australia. The Ravensthorpe processing plant will produce a mixed nickel-
cobalt hydroxide intermediate product (MHP). Engineering and procurement
activities are now over 98 per cent complete and construction continues to
ramp up with more than 1,700 people now working at site. Erection of
structural steel is well advanced and mechanical and piping works are in
progress. The first autoclave has been installed and the second is awaiting
transport to site.
Yabulu Extension Project, Australia
The Yabulu Extension Project was approved in March 2004. The metal refining
section of the Yabulu refinery near Townsville in Queensland is being
expanded to process up to 220,000 tonnes of MHP. This additional processing
capacity will increase refinery production to 76,000 tonnes of nickel and
3,500 tonnes of cobalt. Overall project progress is 64 per cent.
Following a review of project costs completed in August 2005, a revised
budget of US$460 million was approved. Project delivery is on schedule and
commissioning will start ahead of delivery of feed from Ravensthorpe.
PETROLEUM EXPLORATION
Exploration and appraisal wells drilled during the quarter or in the
process of drilling as at 30 June 2006.
WELL LOCATION BHP BILLITON STATUS
EQUITY
Blackbeard Gulf of 5% BHP Billiton; Drilling ahead.
West-1 Mexico, Exxon operator
South
Timbalier
Block 168
Puma-2 & 3 Gulf of 33.3% BHP Puma 2 recommenced
Mexico, Billiton; operations early
Green Canyon BP operator April, currently
Block 821 / drilling ahead.
866 Puma 3 is
temporarily
suspended.
Ouachita-1 Gulf of 16.875% BHP Drilling ahead.
Mexico, Billiton;
Green Canyon Amerada Hess
Block 376 operator
Kingbird-1 Trinidad & 30% BHP Billiton Spudded mid June,
Tobago, Block and operator currently drilling
3(a) ahead.
Dixon-2 Dampier Sub- 16.66% BHP Successful
Basin Billiton, appraisal.
Western Woodside Plugged &
Australia operator suspended.
WA-9-R
Brecknock-3 Browse Basin 8.33% BHP Spudded early June,
Western Billiton, currently drilling
Australia Woodside ahead.
WA-32-R operator
Pemberton-1 Dampier Sub- 16.66% BHP Spudded mid June.
Basin Billiton, Wireline logging
Western Woodside completed. Results
Australia operator being evaluated.
WA-28-P
MINERALS EXPLORATION
BHP Billiton continued to pursue global exploration opportunities for key
commodities of interest utilising both in-house capabilities and the Junior
Alliance Programme.
Grassroots exploration continued on diamond targets in Angola, Canada and
the Democratic Republic of Congo (DRC); on copper targets in Chile,
Mongolia, DRC and North America; and on nickel targets in Australia, Canada
and Africa. Exploration for iron ore, coal and bauxite was undertaken in a
number of regions including Australia, South America and Africa.
During the quarter BHP Billiton also announced an alliance with MMC Norilsk
Nickel, Russia"s largest mining and metals company, to explore and develop
mineral resources in the Russian Federation. This represents an important
step for BHP Billiton and significant diversification of our geographical
base.
EXPLORATION EXPENDITURE
During the year ended 30 June 2006, BHP Billiton spent US$295 million on
minerals exploration of which US$214 million was expensed. Capitalised
exploration included US$76 million for the Caroona (Australia) exploration
licence.
Petroleum exploration expenditure was US$447 million. The amount expensed
was US$318 million including US$41 million of exploration expenditure
previously capitalised.
Further information on BHP Billiton can be found on our Internet site:
www.bhpbilliton.com
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United States
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South Africa
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BHP Billiton Limited
ABN 49 004 028 077
Registered in Australia
Registered Office: 180 Lonsdale Street
Melbourne Victoria 3000 Australia
Tel +61 1300 55 4757 Fax +61 3 9609 3015
BHP Billiton Plc
Registration number 3196209
Registered in England and Wales
Registered Office: Neathouse Place
London SW1V 1BH United Kingdom
Tel +44 20 7802 4000 Fax +44 20 7802 4111
A member of the BHP Billiton group which is headquartered in Australia
Date: 25/07/2006 07:30:23 AM Produced by the JSE SENS Department
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