3rd UPDATE: Inpex, Total Approve US$34 Billion Australian LNG Project
January 13 2012 - 12:40AM
Dow Jones News
Inpex Corp. (1064.TO) and Total SA (TOT) have given the green
light to build one of Australia's most expensive energy projects at
an estimated cost of US$34 billion over the next five years.
The Ichthys gas-export development will tap a remote deepwater
field off Australia's northern coast containing an estimated 12.8
trillion cubic feet of natural gas.
The hefty price tag is broadly in line with a Citigroup estimate
in June of US$32.5 billion, and a recent Deutsche Bank estimate of
A$31.9 million (US$33 billion).
It also demonstrates that international energy companies remain
prepared to place bold bets on an anticipated surge in demand from
Asia for fuels that burn cleaner than coal, in spite of ongoing
global economic jitters.
Australia has close to a dozen giant gas projects in the
pipeline to feed fuel-strapped Asian economies, including Japan,
which is seeking more gas as an alternative fuel following the
Fukushima nuclear accident, and rapidly industrializing economies
such as China.
Demand for liquefied natural gas will surge, Inpex President
Toshiaki Kitamura said.
"Japan is the world's top LNG importer. We can't secure stable
supply by just waiting for developers coming up with cargoes to the
market," Kitamura said, stressing the importance of Japan's
investment in the upstream business.
Gas from the Ichthys field will be piped to a plant in Darwin
that can produce 8.4 million metric tons of LNG each year for seven
Japanese utilities and Taiwan's CPC Corp.
LNG is cleaner than other fossil fuels, including coal, and
cheaper to produce.
The largest Australian LNG venture is the Chevron Corp.-operated
Gorgon project, sanctioned in 2009 and estimated to cost A$43
billion.
Ichthys, however, is the most expensive development per ton of
LNG produced, mainly because of its remote location and the
885-kilometer pipeline needed from the offshore gas field to
Darwin.
But Kitamura said, "We are confident of the profitability of
this project," citing relatively large amounts of co-produced
condensate and Australia's regulations that are "generous" to
foreign investors.
Ichthys is expected to produce 100,000 barrels per day of
condensate, a light oil, at peak production, and 1.6 million tons
of liquid petroleum gas each year.
Australia's stable political environment makes the resource-rich
country a safer place to risk large sums of cash, while its
proximity to Asia helps suppliers save on shipping costs. Such
benefits have attracted enough investment in Australia to
potentially hoist it above Qatar as the top LNG exporter by the end
of the decade.
"Australia is well on track to becoming the major gas supplier
in the Asia-Pacific region," Australian Resources Minister Martin
Ferguson said Friday.
Still, Ichthys progress may be negative for rival developments,
including Woodside's complex Browse project, which is also located
in the remote Browse Basin.
Australia already has a tight labor market, and a shortage of
skilled workers last year prompted Woodside to announce a third
delay and cost overrun at its A$14.9 billion Pluto LNG project in
Western Australia state.
Inpex chairman Naoki Kuroda said engineering, procurement and
construction of the Ichthys onshore LNG facility will be carried
out by a joint venture comprising JGC Corp. (1963.TO), KBR Inc.
(KBR) and Chiyoda Corp. (8185.TO).
Samsung Heavy Industries Co. (010140.SE), General Electric Co.
(GE) and McDermott International Inc. (MDR) are among companies to
be awarded development contracts.
Roughly 70% of Ichthys' output will be shipped to Japanese
utilities, including Tokyo Electric Power Co. (9501.TO), Tokyo Gas
Co. (9531.TO), Osaka Gas Co. (9532.TO) and Kyushu Electric Power
Co.
Inpex recently agreed to sell a 1.575% stake to Tokyo Gas, which
will reduce its stake in the LNG project to 72.8%. Total owns 24%
and is in talks with Inpex to raise its stake, Kitamura said.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
--Mari Iwata in Tokyo contributed to this article.
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