LNG sales contracts net very big fish

WITH a well-balanced portfolio of exploration and production assets, Inpex Corporation has an increasing focus on LNG that will see it emerge as a new global force in the sector by 2016.
Ranked in the top 100 global energy companies, Inpex has a strong international presence and is involved in more than 70 projects in 26 countries. Although listed on the Tokyo Stock Exchange, the company has been a part of the Australian business community since 1986.
The Tokyo-headquartered company has budding LNG interests in Indonesia and Australia, where it is operator of the Ichthys LNG project offshore WA.
Inpex considers the US$34 billion project – for which it will develop the Ichthys gas and condensate field in a joint venture with Total – to be one of the largest and most challenging projects it has ever embarked on. Inpex has interests in a string of ventures offshore WA and the Northern Territory.
These include: the Kitan oil field, in which it has a 35 per cent stake; the Bayu-Undan gas-condensate field/Darwin LNG plant (11.3 per cent); the Van Gogh project (47.5 per cent); the Coniston oil field (47.49 per cent); and the Ravensworth project (28.5 per cent).
The company’s journey toward development of the Ichthys project began in 1998, when it acquired petroleum exploration permit WA-285-P in the Browse Basin, about 820km southwest of Darwin.
As operator, Inpex owns about 73 per cent of the project. Total has a 24 per cent participating interest (which it acquired in 2006), and Tokyo Gas, Osaka Gas and Toho Gas all hold minor interests.
Named after the Greek word for ‘fish’, the Ichthys field was discovered after three exploratory wells were drilled during 2000 and 2001. The field’s most likely resource estimates are 12.8 trillion cubic feet of gas and 527 million barrels of condensate, to be produced during an operational life of more than 40 years.
Set for production start-up in 2016, Ichthys field gas will undergo preliminary processing at an offshore central processing facility (CPF) to remove water and raw liquids, including a large proportion of the condensate. This condensate will then be pumped to a floating production storage and offloading (FPSO) facility and transferred to tankers for delivery to various markets.
The gas will be transported from the CPF through a subsea pipeline more than 885km to the onshore LNG processing plant to be built at Blaydin Point on Middle Arm Peninsula in Darwin. The gas will be cooled to below minus-161 degrees Celsius to become LNG.
In addition to the CPF, the FPSO and the export pipeline to Darwin, the offshore facilities will also include umbilicals, risers and flow lines.
The onshore facilities will comprise: two LNG trains with the capacity to produce 8.4 million tonnes per annum; LPG and condensate processing plants; storage tanks for LNG, LPG and condensate; administration facilities, utilities and services; power generation infrastructure; and a product offloading jetty.
In a recent statement, Inpex chairman Naoki Kuroda said that the Ichthys final investment decision (FID) announced in January 2012 signalled the beginning of construction for one of the world’s largest LNG facilities.
“In delivering this important project into production, we will be securing vital long-term energy supply to Japan and our other customers while delivering sustainable economic and social benefits across Australia,” Mr Kuroda said.
He said that the Ichthys LNG project was the cornerstone of the company’s growth strategy into the 21st century, and that it would be the first time Inpex was leading such a world-scale project as operator. “Ichthys production volumes represent more than 10 per cent of Japan’s LNG imports at current levels,” Mr Kuroda said. “Ichthys will provide a long-term stable supply of cleaner energy to Japan, and help Japan diversify its energy sources.” According to Mr Kuroda, the project’s commercial strength would help Inpex to achieve its objective of doubling its oil and gas production during the next decade. Economic benefits Set to be the largest oil and gas development serviced by the Northern Territory, the Ichthys LNG project will deliver significant social and economic benefits to Australia. It will also showcase the Northern Territory as a region that is capable of supporting the construction and operation of a major development.
“Ichthys will truly be an international collaboration. An estimated 3000 jobs will be needed in Darwin during the peak of construction, with a further 1000 offshore.
Once the project is in operation, we will require approximately 700 permanent positions,” Mr Kuroda said. Inpex and Total have already committed to a $91 million environmental and social benefits package to provide long-term benefits for the community during the life of the project and beyond, including a $3 million contribution to Charles Darwin University to accelerate plans for its North Australian Centre for Oil and Gas.
“Inpex is committed to contributing to the sustainable development of the communities in which we operate: improving social and economic well-being while minimising impact on the environment,” Mr Kuroda said. In 2009, Inpex agreed to the Ichthys Project Australian Industry Participation Plan with the Northern Territory and Federal Governments, to create mutual benefits through business and employment opportunities.
The key objectives of the plan are to: ensure that Australian industry is provided full, fair and reasonable opportunities to participate in the Ichthys project; develop long-term relationships that ensure innovation, effective cost management and value-added solutions are delivered; encourage and facilitate local business participation and development in the oil and gas industry; identify and increase the number of local people with the skills to work in the oil and gas industry; and increase livelihood opportunities for local Aboriginal and Torres Strait Islander communities through direct employment and business engagement.
In March 2012, the largest contract to have ever been awarded in the Northern Territory was won by local companies Macmahon
Contractors and John Holland in a 50/50 joint venture for the construction of the onshore facilities at Blaydin Point. In a statement, Northern Territory chief minister Paul Henderson said that both were well-known businesses that had been subcontracting, employing and training in the state for years.
“This $340 million contract is just the beginning of many local opportunities the multi-billion dollar Ichthys gas project will bring,” he said.
“The Territory has a very bright future as we move into a period of significant economic growth that will bring with it high-skill, high-wage job opportunities.” Mr Henderson said that the state could already see the benefits of the project starting to flow on to local business and Territorians.
The contract was awarded by Ichthys engineering, procurement and construction contractor the JKC Joint Venture, and will create the first 375 jobs of the total 3000. “Territorians who want a job on the Ichthys project will soon be able to drop in to a JKC [Joint Venture] shopfront in the Darwin CBD to find out what’s available and how to apply, and there will also be a dedicated jobs website,” Mr Henderson said. Sales The entire volume of LNG to be produced from the Ichthys project has already been allocated to sales contracts,with 70 per cent to be delivered to Japan.
Ichthys LNG, a company jointly owned by Inpex and Total, signed a legally binding sales and purchase agreement (SPA) with a consortium of five major Japanese utility companies in December 2011.
Under the SPA, Ichthys LNG will sell the companies a total of 4mtpa of LNG for 15 years, starting in 2017.
Tokyo Electric Power and Tokyo Gas will each receive 1.05mtpa, The Kansai Electric Power Company and Osaka Gas will both be given 800,000 tonnes per annum, and Kyushu Electric Power Company will receive the remaining 300,000tpa.
Inpex also has LNG sales agreements with Chubu Electric Power Company, Toho Gas and and CPC Corporation (Taiwan) for a total of 2.52mtpa.
In addition, Inpex and a Total affiliate will also take a combined 1.8mtpa of LNG from the Ichthys project. Prelude FLNG In other LNG developments, Inpex has acquired a 17.5 per cent participating interest Shell’s Prelude floating LNG (FLNG) project, off the coast of WA.
About 475km north-northeast of Broome, the Prelude FLNG project lies within permit area WA-44-L and consists of the Prelude and Concerto gas fields. The gas fields will be developed utilising the FLNG facility, and will produce at
least 3.6mtpa of LNG, 400,000tpa of LPG and a peak rate of about 36,000 barrels of condensate per day.
Inpex is also preparing for the development of its large-scale Abadi LNG project in Indonesia, for which it selected Shell as a strategic partner.
“Participating in the Prelude FLNG project will enhance Inpex’s FLNG experience, and will help in [the] timely delivery of the Abadi LNG project,” Inpex stated. Shell made the FID on the Prelude FLNG project in May 2011, and is targeting a production start-up for 2017: 10 years after the Prelude gas field was discovered. Inpex stated that the transaction was subject to the satisfaction of certain conditions, including approval from the Australian Government.

 

By Jaimee Conn

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