Total and INPEX Corp. on Friday announced that they will proceed with the US $34 billion Ichthys LNG project in Australia. The decision will have lasting implications for Australia's role in the LNG sector.
"Today is a landmark decision for the Northern Territory and for Australia, brining a critical mass of LNG developments to see Darwin emerge as a significant regional hub for the industry," said Martin Ferguson, Australia's Minister for Resources and Energy, at the official announcement in Darwin.
INPEX and Total's final investment decision ushers in the construction of one of the world's largest LNG facilities. The project calls for the construction of onshore gas processing facilities in the city of Darwin in Australia's Northern Territory that will produce 8.4 million tonnes per annum of LNG. In addition to 4.2-mtpa liquefaction trains, the onshore installations will include facilities for extracting and exporting LPGs and condensate. Total expects Ichthys to produce 1.6 mtpa of LPGs and 100,000 barrels of condensate a day at the project's peak.
"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," INPEX Chairman Naoki Kuroda said in a written statement.
An 889-km gas transmission pipeline will carry gas and condensate to Darwin from the Ichthys gas and condensate field offshore North West Australia.
Total, which owns a 24-percent stake in Ichthys LNG, said the field holds approximately 3 billion barrels oil equivalent of reserves; this figure includes roughly 500 million barrels of condensate. According to the French supermajor, the offshore facilities will comprise a subsea well development linked to a central processing facility (CPF1) for gas treatment and a floating processing, storage and offloading (FPSO2) vessel for condensates. The CPF and FPSO reportedly will be among the largest in the world.
Total expects first production from the field in 2016.
"Major investments like the Ichthys Project mean prosperity and opportunity and for those nations turning to Australian LNG as a source of clean energy," said Ferguson. According to Ferguson's ministry, Ichthys is the second-largest resources project in Australia's history and increases total LNG sector investment to more than $175 billion. Other major projects such as North West Shelf, Bayu-Undan & Darwin, Pluto and GLNG are cementing Australia's position as one the world's top LNG exporters. Sydney's The Australian newspaper reports that the country's export volume could quadruple to 80 million tonnes over the next decade.
INPEX reported that mobilization for project construction will begin immediately. Preliminary work on the onshore phase at Blaydin Point in Darwin will begin "within weeks," the company noted. The JKC joint venture, which includes JGC Corp., KBR and Chiyoda Corp., has been awarded the engineering, procurement and construction contract for the onshore LNG plant and associated infrastructure.
INPEX also confirmed the following contracts to be awarded for the major offshore work packages:
- Central processing facility -- Samsung Heavy Industry
- Subsea production system -- General Electric
- Subsea flow line construction and installation -- McDermott in cooperation with Heerema
- Gas export pipeline -- Mitsui-Europipe, Sumitomo, Nippon Steel-Metal One (pipe manufacture); Mitsui-Bredero Shaw (pipe concrete coating); Saipem (pipelay)
- FPSO vessel -- to be announced within weeks
“Through this project, Total further increases its presence in Australia and its access to the Asian LNG market, the fastest-growing market offering high-value prices,” Yves-Louis Darricarrere, Total's President of Exploration & Production, said in a statement.
For project operator INPEX, Ichthys represents the linchpin the company's growth strategy. Moreover, it will serve as a key supply of LNG for Japan's power sector. According to a Dow Jones article, major Japanese utilities including Tokyo Electric Power (TEPCO), Tokyo Gas, Osaka Gas and Kyushu Electric Power Co. will be the recipients of more than two-thirds of Ichthys' output. In addition to INPEX and Total's 72.805- and 24-percent interests, respectively, in Ichthys LNG, other project owners include: Tokyo Gas (1.575 percent), Osaka Gas (1.2 percent) and Toho Gas (0.42 percent).
"Ichthys production volumes represent more than 10% of Japan's LNG imports at current levels," Kuroda noted in the company statement. "Ichthys will provide a long-term stable supply of cleaner energy to Japan, and help Japan diversify its energy sources."
Interestingly, a bit of diplomacy during Friday's announcement showed how far relations between Australia and Japan have progressed over the past several decades. According to Darwin's local newspaper, a high-level Japanese official apologized for his country's bombing of the Northern Territory city during World War II. On Feb. 19, 1942, nearly 200 Japanese warplanes devastated the city and killed hundreds during a pair of air raids.