Interview: Australia's Ichthys LNG 'very close' to output plateau, next steps under consideration

London — Australia's Ichthys LNG facility is "very close" to reaching plateau production rates with more than 200 cargoes of LNG, LPG and condensate loaded since startup in 2018 and new drilling and expansion projects envisaged, Hitoshi Okawa, Australia managing executive officer at Japanese project operator Inpex, has said.

In an interview in Florence, Italy, early this month, Okawa noted Australia had become the world's number one LNG producer, overtaking Qatar partly on the back of Ichthys, from which the first LNG cargo loaded in October 2018. Three LNG cargoes a week are now being loaded, he said.

He described the production ramp-up at the two-train facility, which has a total capacity of 8.9 million mt/year, as going "very smoothly" and voiced hope for additional trains to be added.

"We're getting there, very close, not completed. We are on the way and very close to the plateau production," he told S&P Global Platts in an interview on the sidelines of the Baker Hughes AM2020 conference.

Much of Inpex's share of production from Ichthys is sold under long-term contracts with clients in Japan and Taiwan, but low LNG spot prices remain a concern given the portion not sold on such contracts, he said, describing spot market prices as "not ideal."

Okawa played down the delays and cost over-runs that characterized the $45 billion project, stressing its size and complexity and the need to integrate upstream production with an 890-kilometer pipeline to shore and the liquefaction facilities in Darwin, in the Northern Territories.

"Our project is a world-class project. From our point of view it's a natural cost, it's a very complicated and massive facility. The three components need to be integrated, so that is the biggest challenge of course," he said.

Once production is running smoothly and has stabilized, then debottlenecking can place, he said.

In terms of upstream supply, all 18 production wells initially planned are in production, and a second phase of drilling will start "shortly," Okawa said.

Inpex holds a 66% stake in Ichthys, alongside Total, Taiwan's CPC, and several Japanese utilities.

'BACK-FILL' OPPORTUNITIES

Further production to feed the LNG plant will be sought from other operators in the Browse basin, as well as through exploration by Inpex, he said. The company has not revealed a total resource estimate for Ichthys, but resources are thought to be sufficient for 40 years' output.

Inpex foresees a "back-fill opportunity to bring gas from other sources to tie in to our facility — our exploration acreage — and also there's a possibility of some already discovered, but not developed [resources]," he said.

"We have a big facility already. There are several discoveries over there. If we bring that gas to our facility it's the most economical way" to develop them, he said.

Okawa noted a need to address concerns about climate change, saying several projects for reducing emissions were on the table, and "public perception is strongly against our industry."

"For Inpex we've seriously received this message and we're very focused on reducing carbon emissions. This is an unavoidable subject," he said.

Projects in this area included a potential methanation plant, something the company has been working on in Japan, as well as the possibility of carbon capture and storage, on which a "desk-top study" has been completed, he said.