Ichthys LNG Project Sanctioned: Total Investment Value Reaches $34 Billion

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Researched by Industrial Info Resources Australia (Perth, Australia)--INPEX Corporation (TYO:1605) (Tokyo) and Total SA (NYSE:TOT) (Paris, France) reached a final investment decision (FID) last Friday, January 13, for the Ichthys LNG production plant.

The project will cost joint venture parties US$34 billion to develop. Ichthys LNG is fully contracted, with sales and purchase agreements committed for a 15-year supply period commencing in 2017. The venture has a total of eight customers, three of which will become equity partners in the project. Subject to Australian government approval, Tokyo Gas will own 1.575% of the Ichthys project, Osaka Gas will own 1.2% and Toho Gas will own 0.42%. Total is retaining its 24% share in the project, with INPEX decreasing its share from 74% to 72.805%. Ichthys will begin operations by the end of 2016.

The Ichthys project will include an 889-kilometre (550-mile) subsea pipeline from the floating production and storage offloading facility in the Browse Basin, in Western Australia, to reach the LNG plant in Darwin, Northern Territory. The plant will have an initial output capacity of 8.4 million metric tonnes per year, with designated space for future expansion. There is sufficient gas in the Ichthys field to cater for up to six 4.2 million-ton-per-year processing trains. Ichthys is also set to provide 1.6 million metric tons per year of LPG, and up to 1,000 barrels of condensate per day.

The workforce requirement during the construction phase is estimated to reach 3,000 Darwin-based workers at peak, and 1,000 offshore workers.

The greater part of the key EPC contracts have been awarded with announcements made in conjunction to the news of capital approval being achieved. The onshore component of the project will see front-end engineering and design (FEED) joint venture, JKC Joint Venture, comprised of JGC Corporation (TYO:1963) (Tokyo, Japan), KBR Incorporated (NYSE:KBR) (Houston, Texas) and Chiyoda Corporation (TYO:6366) (Yokohama, Japan), morph into the role of EPC contractor. Samsung Heavy Industries Company Limited (SEO:010140) (Seoul, South Korea) has the EPC contract for the central processing facility. The winner of the EPC contract for the floating production storage and offloading vessel is yet to be announced. General Electric Company (NYSE:GE) (Fairfield, Connecticut) will build the subsea production system.

Mc Dermott International Incorporated (NYSE:MDR) (Houston, Texas) has won a number of big contracts in Australia over the past year and set up a large-scale Western Australian base; the company, with assistance by Heerema (Leiden, Zwijndrecht, Netherlands) will construct and install the subsea flow line for Ichthys offshore. Mitsui (Tokyo, Japan), Europipe (Mülheim an der Ruhr, Germany), Sumitomo (TYO:5405) (Osaka), Nippon Steel (Tokyo) and Metal One (Tokyo) will manufacture the natural gas export pipeline. Saipem S.p.A (OTC:SAPMY) (Milan, Italy) has the pipelay contract and will be responsible for seeing one of the longest subsea pipelines in the world stretch across two states in the Northwest of Australia.

In terms of monetary value, this is by far the biggest project to take place in the Northern Territory, and the $34 billion foundation phase figure is shy of only one other Australian LNG project: Gorgon.

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