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Ichthys LNG project costs blow out further

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LNG Industry,

Reuters are reporting that the Ichthys LNG project in Australia is likely to see further cost blowouts and possible delays in production.

Costs for the project, which has already been hit with multiple delays and a recent deadly industrial accident, could reach US$40 billion, up from US$37 billion.

Inpex Corp, Japan’s biggest oil and gas explorer, announced that it is sticking with its schedule for production to begin at Ichthys in Australia by the end of March.

The priority is to start Ichthys up in the second quarter though the first gas production is expected by the end of March.

Ichthys has been plagued by delays and cost overruns and was originally slated to cost US$34 billion, before Inpex in 2015 said costs were closer to US$37 billion. Other projects in Australia have seen big costs rises, including Gorgon LNG run by Chevron.

The original target for production at Ichthys was 2016.

The March target is unrealistic for either gas or condensate. The project cost could reach as much as US$50 billion.

It is the first time a Japanese company has attempted to undertake such an ambitious project and it is considered to be a national priority for a country that imports most of its energy supplies. Japan is the world’s biggest importer of LNG.

Inpex is the majority owner of the project, while Total has a 30% stake.

At full operation, Ichthys is expected to produce 8.9 million tpy of LNG, along with about 1.7 million t of liquefied petroleum gas and about 100 000 bpd of condensate.

Most of the project’s buyers are Japanese companies, which have seen their LNG requirements rise after the shutdown of reactors following the 2011 Fukushima nuclear disaster. Some of them have minor stakes in Ichthys.

Inpex halted construction work in November on the onshore section of the project after a worker died in an accident there.

Inpex reported profit for the nine months through December rose about 11% to a little over 53 billion yen (US$484 million).

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