INPEX

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INPEX

FID editorials - Jan 2012

The journey has just begun

As it turned out, Friday the 13^th was decidedly lucky for Darwin. It’s the day our city was thrown onto the international stage and its economic future secured.

On Friday 13 January, the Ichthys Project announced the Final Investment Decision (FID) on the $34 billion Ichthys liquefied natural gas (LNG) Project.

The highly anticipated announcement, made by INPEX Chairman Naoki Kuroda before a packed media contingent at the Darwin Convention Centre, means Darwin will be the site for an onshore gas processing facility that will produce 8.4 million tonnes of LNG every year.

The plant, which will take five years to build, will be one of the world’s largest LNG facilities. It will process an incredible 40 years worth of gas and condensate (a valuable petroleum liquid by-product used in fuels like diesel) discovered in the Browse Basin off the Western Australia coast. An 889 kilometre pipeline will connect the Ichthys Field to the Blaydin Point LNG plant on Middle Arm Peninsula.

“It’s a very simple announcement, but it represents the outcome of massive volumes of work in many areas of the world by hundreds of people during the past decade,” Mr Kuroda said at the FID announcement.

When the Ichthys Project reaches peak production sometime in 2017, the output will be equivalent to more than 10 per cent of Japan’s annual energy demand.

That’s a vital long-term source of energy for Japan, and sale agreements have been freshly signed for the Project’s entire gas production for 15 years from 2017.

“Ichthys will provide a long-term, stable supply of cleaner energy to Japan, and help Japan diversify its energy sources,” Mr Kuroda said. “It will also contribute significantly to the growth of the Australian economy while strengthening friendly ties between Japan and Australia.

“Ichthys will truly be an international collaboration,” Mr Kuroda said. “An estimated 3000 jobs will be needed in Darwin during the peak of construction with a further 1000 offshore. Once the project is in operation we will require approximately 700 permanent positions onshore in Darwin and offshore at the Ichthys Field.”

This project will transform Darwin. It will add almost 18 per cent to our gross state product each year, increase household income and spending and provide education, training, employment and business opportunities for Territorians now and well into the future.

Community benefits – just the beginning

There is no doubt about what’s at the core of the INPEX formula.

One could say the Ichthys Project walks the talk. Ever since the Project announced Darwin as its onshore site for the LNG plant, it has contributed significantly to the sustainable development of communities in the Northern Territory and is fully committed to minimising potential impacts on the environment.

Even before the official go-ahead was given, INPEX and Total invested $70 million in carefully preparing the Darwin community and its environment for this enormous and exciting development.

A good chunk of that investment is in the future of Territory’s young people.

The career opportunities a project like Ichthys presents are significant, and something the Project is intent on fostering. The joint venture has donated $6 million to kick-start two new educational facilities here.

The North Australian Centre for Oil and Gas will be a state-of-the-art training and research facility at Charles Darwin University. Students will be able to study for specialised oil and gas qualifications which will set them up for a secure, rewarding and well-paid career without having to leave Darwin. INPEX and Total’s $3 million contribution accelerated plans for the centre.

The joint venture also donated $3 million to help build the Larrakia Trade Training Centre, which opened in February 2011. At the Centre, both Aboriginal and non-Aboriginal students are trained in electrical, automotive mechanics, metal fabrication, plumbing, civil and general construction, refrigeration and mining. These are real trades that translate to excellent career opportunities in the resources and construction industries.

In addition to these education and training programs, the Project has sponsored community generated initiatives and committed to an impressive $91 million environmental and social benefits package. This will benefit the Darwin community over the 40-year life of the Project and beyond. This includes:

40-year research and monitoring program of Darwin Harbour
Long-term dolphin survey to protect and better understand their numbers and habitats
Producing habitat maps of the Darwin region that will assist with coastal planning and monitoring
Assisting Traditional Owners to preserve dolphins, dugongs and marine turtles through conservation management
Investigating savannah fire management opportunities to offset greenhouse gas emissions
Supporting Australian Research Council research and development programs that focus on Darwin Harbour.

INPEX and Total are also making sure our roads can handle the massive amount of equipment and construction material required to build the onshore facilities with a $13 million injection into the Territory’s infrastructure kitty.

About $9 million has been spent on bringing forward the Northern Territory Government’s planned upgrade of Jenkins Road which, during construction, will become the Project’s heavy haulage route to the LNG facilities on Blaydin Point. The road will divert heavy vehicles from Palmerston, improving safety and minimising inconvenience to the public. A further $4 million will be spent on upgrading the Arnhem and Stuart Highway intersection and the Jenkins Road-Stuart Highway intersection.

3. Ichthys numbers tell strong economic story

The Ichthys Field in the Browse Basin offshore Western Australia contains enough gas to power the whole of Australia for more than 12 years.

That’s enough to power tens of thousands of Japanese homes and businesses for the entire 40-year lifespan of the Ichthys Project. And that’s exactly what will happen.

It’s a revelation that immediately illustrates just what a big deal this project is - a global energy supply that will help stamp Darwin firmly on the map as Australia’s new capital of oil and gas well into the next generation.

The flow-on benefits for Darwin and the Northern Territory are substantial.

The entire community, from small retailers through to large construction companies, will benefit from this project.

The hard numbers tell it best.

Ichthys will contribute about 18% to the Territory’s gross state product each year over the life of the Project. It will prompt a progressive strengthening and expansion of the NT economy during construction and throughout operations.

As a direct result of Ichthys, the Australian economy is forecast to expand by up to $3.5 billion annually.

Here in the Territory, the economic stimulus set off by the Ichthys Project will increase household spending by an estimated $175 million annually.

Put another way, Territorians will collectively have about $175 million that they didn’t have before, which they’ll spend on food, entertainment, property, travel, education, home improvement, clothes, shoes, services and plenty of other stuff; some of which is sold by Northern Territory businesses.

It will also attract other industry to the Territory, like transport, health and professional services, bringing skills, resources, equipment and new businesses that aren’t here now. This boosts the economy even more.

The Territory’s labour market will most certainly benefit. At the peak of construction, a workforce of approximately 3000 will be needed to build the onshore facilities. When that’s up and running, 300 permanent positions will be created in Darwin. That’s 300 ongoing jobs, from gas plant operators and tradespeople right through to engineers and PhD research graduates.

All in all, Ichthys is a project of not only national significance, but global significance, particularly for the Japan-Australia relationship. Ichthys production volumes represent more than 10% of Japan’s current Liquefied Natural Gas (LNG) imports. This project will deliver a long-term stable supply of cleaner energy to Japan, and help it to diversify its energy sources. So on top of contributing to the growth of the Australian economy, the Ichthys Project will also strengthen friendly ties between Japan and Australia. That’s a really good thing for the Territory.

Construction snapshot

Building a project the size of Ichthys requires some pretty significant infrastructure.

The onshore gas-processing facilities will be located at Blaydin Point, not far from the Darwin LNG plant operated by ConocoPhillips. It will include:

Two liquefied natural gas (LNG) ‘trains’
Liquefied petroleum gas (LPG) plant
Condensate plant
Product load-out jetty
A 300-megawatt power station - larger than Darwin’s existing station on Channel Island.

On top of this, an accommodation village is also being built in Howard Springs to house up to 3500 fly-in-fly-out workforce that will be needed during the peak of the construction phase.

When will construction start?

From April, work will start on Blaydin Point making it ready for construction. Civil works will include earthmoving, site clearing, forming up access roads and securing the site.

What is the construction timetable?

January 2012 – January 2014 Onshore civil site preparation and Module Offloading Facility (MOF) construction

The gas plant will be built offsite in a ‘modular’ fashion, in chunks, rather than in the traditional ‘stick-build’ fashion where everything’s built on site. This is a more efficient construction method where pieces are pre-built, hauled to site by barge and placed in position and bolted to other modules. Some of these ‘modules’ will be up to 7000 tonnes in weight and up to 40 metres in length.

April 2012 – 2015 Deepening the shipping channel

Dredging is required to create a safe shipping channel through Darwin’s working harbour, along with a berthing area for LNG tankers arriving at the gas processing facility on Blaydin Point.

Dredging is required because water depths in the area are currently too shallow for safe access for liquefied natural gas (LNG), liquefied petroleum gas (LPG) and condensate tankers.

Dredging will also be required to install the gas pipeline through Darwin Harbour.

Dredging was subject to environmental review and approval and will take the Project about three years to complete.

April 2013 – April 2016 Procurement and construction of LNG tanks

Separate tanks must be constructed for the LNG, LPG and condensate (a valuable gas by-product). This process will take about three years.

July 2013 – October 2015 Offloading jetty procurement and construction

This phase is about finishing the design and construction of the jetty. The offloading jetty transports the products (LNG, LPG and condensate) from the onshore facilities to the export vessels.

January 2014 – July 2014 Gas Export Pipeline (GEP) rock transport to East Arm Port

Quarried rock will be layered over the gas pipeline that runs along the bed of Darwin Harbour to protect it from ships, anchors and other hazards. This is called ‘rock armour’ and will take about six months to get in place.

2014 – End 2016 LNG Train on-site installation and hook-up

The onshore plant will have two LNG ‘trains’ that process the gas by cooling it to a liquefied form for transport to market. Once both trains are installed, the first train will be brought into production, and when at full capacity, the second train will then go into commissioning.

When is first gas scheduled for?

The first gas production is scheduled to begin by the end of 2016.

When will the first LNG ship leave Darwin Harbour?

The first LNG ship is scheduled to sail out of Darwin Harbour in early 2017, bound for market in the Asia/Pacific.