Inpex to construct LNG terminal off Indonesia

Inpex, bowing to pressure from the Indonesian government and seeking to start deliveries of LNG to Japan quickly, will likely construct an offshore export terminal at a cost of more than ¥1 trillion.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Oct. 6 -- Inpex Corp., bowing to pressure from the Indonesian government and seeking to start deliveries of LNG to Japan as soon as possible, will likely construct an offshore export terminal at a cost of more than ¥1 trillion.

Inpex Pres. Naoki Kuroda said the Japanese firm will make a final decision in 2-3 months, and is likely to sign an agreement with Indonesia by yearend.

Inpex had two options for the terminal: to build on solid ground in Australia and transport gas from Indonesia through pipelines, or to build an offshore terminal inside Indonesian territorial waters.

Gas for the terminal would come from the Masela block, currently under development in the Timor Sea, where Kuroda owns a 100% stake. The Masela block is lies 400 km from Darwin in northern Australia.

Indonesian officials, who made construction of the offshore terminal a condition for Inpex's Masela block project, said development could begin as early as November, assuming that a final agreement was reached (OGJ Online, Sept. 4, 2008).

In July Inpex confirmed sufficient gas reserves to start 4.5 million tonnes/year of LNG production in the Masela block in 2016, following its completion of a four-well appraisal program.

In August Inpex said it had decided to build an LNG regasification terminal in northwestern Japan to meet robust growth in LNG demand, with operations to begin there in 2014.

The new Japanese receiving terminal is expected to be able to handle around 500,000 to 1 million tonnes of LNG imports in its first year of operation, and in excess of that afterwards, according to Hisatake Matsuno, a director at Inpex.

Matsuno also said the terminal would receive LNG supplies from Inpex's own projects in Indonesia and Australia, where, with partner Total SA, will build a facility to produce more than 8 million tonnes/year of LNG starting in 2014 in Darwin.

Desirous of starting LNG production as soon as possible to meet the needs of the planned developments, Kuroda said that Inpex will build the offshore terminal in Indonesia.

Kuroda nonetheless said that growing LNG demand and high LNG prices would make the project worthwhile, offsetting its estimated cost of ¥1 trillion.

He said construction will be financed by bank loans and Inpex's own cash reserves, and that Inpex also will consider selling part of its stake in the Timor Sea gas field to foreign energy companies.

The new terminal, which would secure up to 7% of Japan's annual LNG imports, will provide some 4.5 million tonnes/year of LNG by 2015—all of it bound for Japan.

Contact Eric Watkins at hippalus@yahoo.com.

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