TOKYO: The giant Ichthys liquefied natural gas (LNG) project in Australia, the first to be led by a Japanese company, Inpex Corp, is likely to see further cost blowouts and possible delays in production, its junior partner said on Thursday.
Costs for the project, which has already been hit with multiple delays and a recent deadly industrial accident, could reach $40 billion, up from $37 billion, Patrick Pouyanne, chief executive of Total, told reporters at an earnings conference in Paris on Thursday.
"The project is moving on," Pouyanne said in the video conference. "Maybe it will end up at about $40 billion."
Inpex Corp, Japan's biggest oil and gas explorer, on Thursday when it also reported earnings, said it is sticking with its schedule for production to begin at Ichthys in Australia by the end of March.
Inpex sees cost overruns of up to a few percent on Ichthys, Senior Managing Executive Officer Masahiro Murayama told Reuters, describing any further expenses as "minimal".
Pouyanne suggested possible further delays when he told reporters that the priority was 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 $34 billion, before Inpex in 2015 said costs were closer to $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.
Multiple sources have told Reuters that the March target is unrealistic for either gas or condensate, with two of them saying the project cost could reach as much as $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 percent stake.
At full operation, Ichthys is expected to produce 8.9 million tonnes of LNG a year, along with about 1.7 million tonnes of liquefied petroleum gas and about 100,000 barrels per day of condensate.
Most of the project's buyers are Japanese utilities, 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 on Thursday reported profit for the nine months through December rose about 11 percent to a little over 53 billion yen ($484 million).
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