Inpex Says Risk of Cost Overruns Reduced at Ichthys LNG Plant

Inpex Corp. (1605) said it has reduced the risk of cost overruns at its $34 billion Ichthys liquefied natural gas project in Australia after Woodside Petroleum Ltd. (WPL) shelved a similar plan citing ballooning expenses.

Japan’s biggest energy explorer has signed lump sum contracts accounting for about 75 percent of the project to lock in costs, Masahiro Murayama, Inpex’s managing executive officer, told reporters in Tokyo today. It will also manufacture more equipment outside of Australia to reduce labor costs for the plant in the country’s north, he said.

Woodside, Australia’s second-biggest oil producer, canceled its plan to build an onshore LNG facility because of costs and is considering a floating LNG plant for its Browse natural gas field off the coast of northern Australia. Floating LNG may be almost 20 percent cheaper than building the Browse project on land, Deutsche Bank AG said last month. An onshore plant would have cost about $45 billion, JPMorgan Chase & Co. said in an April 12 report.

The Ichthys onshore plant, which will be capable of producing 8.4 million tons of LNG a year, is proceeding as scheduled, Murayama said. The plant is scheduled to start production by December 2016, according to the company.

“Cost overruns and delays are always a possible risk with such a large project,” said Murayama. “I don’t think our project will be affected by the problem that Woodside had” after taking the risk-reduction measures.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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