July 4, 2018 / 4:57 AM / 2 years ago

Exclusive - Japan's Inpex delays output from giant offshore gas project in Australia

TOKYO (Reuters) - Japan’s Inpex Corp (1605.T) has delayed gas production from its giant Ichthys field off the coast of Australia just weeks after giving assurances that output would start imminently.

Inpex Corp's president Takayuki Ueda speaks at an interview with Reuters in Tokyo, Japan, July 3, 2018. Picture taken July 3, 2018. REUTERS/Kim Kyung-Hoon

Inpex’s new chief executive officer told Reuters the company was yet to start churning out gas from the $40 billion (£30.29 billion) project and did not give a timetable for when that would happen.

Japan’s biggest oil and gas producer had said on June 1 that commissioning of all onshore and offshore facilities at the much-delayed project was complete and that gas would start flowing within a week or two.

“There are various minor issues to address in the final safety checks ... but there are no major problems with the facilities,” Ueda, 61, said on Tuesday in his first interview with overseas media since taking the helm at Inpex last month.

The liquefied natural gas (LNG) project, already hit by multiple delays, is a major test for Inpex as it marks the first time it has operated a major energy development on its own.

“We can start production in the not too distant future,” Ueda said, without giving details. He added that the company is keeping its target to ship its first LNG cargo by the end of September.

Ichthys will send gas from an offshore central processing facility through an 890-km (550-mile) pipeline to the mainland near the city of Darwin, where it will be processed into LNG for export.

Delays are common with large projects like Ichthys, but the development has been plagued by a wide range of issues, including contractor disputes, technical difficulties and bad weather.

Inpex aims to start the project’s second liquefaction train by year-end, a few months after the first unit starts operating.

At full operation, Ichthys is expected to produce 8.9 million tonnes of LNG a year, along with about 1.7 million tonnes of liquefied petroleum gas and around 100,000 barrels per day of condensate, an ultra-light form of crude oil.

Ichthys will likely take two or three years to reach full production, Ueda said.

After that, Inpex will assess market demand for a possible doubling of the project’s capacity using known gas reserves in the area, he said. Should it expand the project, further major pipelines will likely be unnecessary, Ueda added.

Getting Ichthys up and running will be a significant boost for Inpex, as the project is expected to account for half of its 48 billion yen ($435 million) profit forecast for this business year.

Inpex holds 62.245 percent of Ichthys, France’s Total (TOTF.PA) 30 percent, with the rest spread amongst Taiwan’s CPC Corp CHIP.UL and Japanese utilities.

Ueda said Inpex has accumulated “valuable experience” from Ichthys that it would apply to its Abadi LNG project in Indonesia, where it hopes to start production in the late 2020s.

($1 = 110.4400 yen)

Reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Joseph Radford

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