This story was originally published in The West Australian on 17 May 2018 with the headline "$8b cost blowout for Ichthys." © Peter Milne.
Inpex’s Ichthys LNG project will cost $53 billion, $8 billion more than planned, and may not see substantial production until early next year in a blow to the Japanese operator that is waiting on the Darwin plant to more than double its cashflow.
Inpex chief executive Toshiaki Kitamura told a recent investor meeting that the Ichthys project would cost about $US40 billion ($53 billion), a $US6 billion ($8 billion) jump from early 2012 when the project was approved with a late 2016 production target.
Inpex finance vice-president Masahiro Murayama said Ichthys production would make a limited contribution for some months but a significant effect was expected towards the end of the fiscal year in March 2019 as production ramped up.
Six months ago Mr Kitamura said condensate, LNG and LPG would all be produced by March.
Inpex shares dived 4.5 per cent on Friday and by the close of trade yesterday had shed a further 2.7 per cent.
The cost hike had been flagged in February by Patrick Pouyanne, the chief executive of Total, that owns 30 per cent of Ichthys, but not the delay in significant production.
Mr Kitamura said he expected Inpex to receive about 2.5 trillion yen ($30.3 billion) of cash flow from operations over the next five years and more than half would come from the company’s 62 per cent stake in Ichthys.
The final element of the project to be commissioned, the Ichthys Explorer processing facility off the Kimberley, is expected to receive gas from the subsea wells by the end of May.
Readying the 120,000 tonnes giant had been holding up the project after commissioning of the subsea equipment, Ichthys Venturer floating production facility, a pipeline to Darwin and the first of two LNG trains was announced in March.
Mr Kitamura said the operating cost of Ichthys at full production would be similar to the current company average of $US5.9 per barrel.
In a clear signal of the importance Inpex placed on Ichthys, the company will pay a commemorative dividend when the first cargo sails.
The Ichthys Venturer may produce condensate a month after commissioning, according to a project schedule lodged with regulator NOPSEMA.
In a move likely to bring forward the production of LNG and LPG from the Darwin plant, it is understood that Inpex has filled the 890km pipeline with gas bought from the NT Power and Water Corporation rather than use Ichthys gas.