French energy major Total said it had cut its interest in the Ichthys LNG project operated by Japan's Inpex in Australia, citing cost overruns Total's strict capital discipline. The divestment generated US$1.6 billion for the French company.
Ichthys, one of the large-scale LNG projects around the coast of Australia, which began production earlier this year, was supposed to have cost US$40 billion as of 2017 but that budget was overran by US$5 billion, Total's president for exploration and production, Arnaud Breuillac, said.
"This transaction is part of our constant portfolio review to optimize our capital allocation. Ichthys is part of a wave of Australian LNG projects, which have unfortunately experienced major cost overruns and delays during their construction phase," Breuillac added.
Ichthys has an annual capacity of 8.9 million tons of liquefied natural gas, along with 1.65 million tons of liquefied petroleum gas and a daily capacity of 100,000 barrels of condensate. It has two liquefaction trains, both fully operational as of October this year. In November, the chief executive of Inpex, Takayuki Ueda, said during a visit to Australia that the company was mulling over a further expansion of the project's capacity, which would have required additional investments on the part of the partners.
All of the natural gas produced at the Ichthys facility is for exports, with as much as 70 percent going to Japan. Meanwhile, some parts of Australia are once again threatened with a gas shortage on the local market simply because some see this as too much local gas is being exported.
Last year, it was the East Coast that was in danger of a shortage and that suffered the blow of a gas price spike. Now, according to research from the Australian Energy Market Operator, Western Australia may be in for a shortage in a few years.
By Irina Slav for Oilprice.com
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