BHP Billiton (ASX: BHP) has approved the increased capital expenditure for the Esso Australia-operated Kipper and Turrum projects in the Gippsland Basin, offshore Victoria.

Kipper's capital expenditure has increased to US$900 million (BHP Billiton share) and the facilities are now forecast to be completed in calendar year 2012, BHP Billiton said.

According to the resource giant, "Mercury was encountered in the reservoir during development drilling and mercury mitigation will be managed as a separate project. The timing of first production is subject to resolution of the mercury related issues."

Meanwhile, Turrum's expenditure has been adjusted to US$1,350 million (BHP Billiton share) and is now forecast to begin production in calendar year 2013.

Additional design and fabrication of key structural components has delayed installation and increased the offshore hook up campaign resulting in the cost and schedule adjustments.

BHP said "the Kipper field has confirmed resources of approximately 620 billion cubic feet of recoverable gas and 30 million barrels of oil and gas liquids. Turrum is expected to recover approximately 1 trillion cubic feet of natural gas and 110 million barrels of oil and gas liquids, on a 100 per cent basis."

The Kipper Unit Joint Venture participants are Esso Australia Resources Pty Ltd (32.5 per cent and operator); BHP Billiton (32.5 per cent); and Santos (35.0 per cent).

Turrum is part of the Gippsland Basin Joint Venture in which BHP Billiton and Esso Australia Resources Pty Ltd (operator), each have a 50 per cent interest.