With FEED almost complete and a final investment decision approaching, operator Inpex is moving ahead with the Ichthys LNG project, on track to be the first field development in the Browse Basin off Western Australia. Russell McCulley talks to the operator about the Ichthys journey thus far, and how a spate of major LNG projects could put the squeeze on Australia's labor market.
The Inpex office in downtown Perth, Western Australia, is bustling, having been beefed up to serve as the Ichthys operations center during the project's FEED stage. In fact, the entire city seems to be on its third or fourth cup of coffee.
‘It's a boom time here, which I think is quite different than the rest of the world,' says Bill Townsend, Inpex general manager external affairs & joint venture, from an office overlooking the Swan River. ‘We've got oil and gas, and other resources as well. And Australia managed to get through the GFC without too much of a downturn, particularly in WA,' he says, exhibiting the Australian penchant for abbreviation [that's ‘global financialcrisis' and ‘Western Australia' for the uninitiated].
‘Our unemployment rate is very low. For a relatively short period of time, there was gloom and doom in the papers about where we were headed. And then we had the Gorgon FID announcement, and it went from gloom and doom to, the boom times are back. And Gorgon is one of many.'
Indeed, the sheer number of projects sanctioned or under consideration offshore Western Australia and Northern Territory, along with the Queensland coal seam gas developments, promises over the next decade to put the nation in competition with Qatar for the title of world's largest LNG exporter. The changes are already apparent in Perth and Darwin, NT, the biggest cities in their respective states. And Japanbased Inpex, long content to play a supporting role in major projects, has likewise come into its own.
‘Ichthys is a big step out for the company,' Townsend says. ‘Traditionally, we've been nonoperators in projects, although we've been involved in a lot ofprojects – more than 70 projects in 26 countries. But this is by far the crown jewel for Inpex.'
For Ichthys – classical Greek for ‘fish' – the company teamed with France's Total, which holds 24% interest in the project to Inpex' 76%. ‘Inpex and Total have worked closely together for more than 40 years, mostly in Indonesia,' Townsend says. ‘The two companies have known each other for a long time, so when we were looking to partner with somebody, Total was a logical choice. The relationships existed between our senior management teams.'
The field, discovered in 2000 in the WA-285-P license, holds an estimated 12.8tcf gas and 527 million barrels of condensate and is expected to have an operational life of 40 years. Amec is conducting FEED for the offshore components, with support from subcontractors Aker Solutions and JP Kenny. The contract involves engineering work for a semisubmersible central processing unit; an FPSO for condensate treatment and a storage capacity of 1.14 million barrels; umbilicals, risers and flowlines; and an 885km export pipeline to the Ichthys LNG plant to be located at Blaydin Point, in Darwin.
FEED for the onshore facilities, including two LNG trains with a capacity of 8.4mtpa, went to the JKC joint venture, a consortium of JGC Corporation, KBR and Chiyoda Corporation. The proposed plant will be near the ConocoPhillipsoperated Darwin LNG plant, in which Inpex holds an approximate 11% working interest.
In addition to the 8.4mtpa of LNG, the Ichthys Project will have an initial capacity to produce 1.6 million tonnes of liquefied petroleum gas per year and 100,000b/d of condensate at peak.
‘Significantly, the field is liquid rich, with more than 500 million barrels of condensate, making it the fifth largest liquids discovery in Australia,' Townsend says. ‘The liquids make the project even more economically attractive.'
Inpex is working with Australian environmental regulators to get final approvals for the project with an eye toward a final investment decision 4Q 2011. ‘We have tenders out now for all major packages, which will be back by mid-year,' Townsend says. ‘Last year was really busy, but this year is busier, and we're really ramping up. The project has a lot of momentum now.'
While the project will employ existing technology, he says, it will push some of that technology to extremes. The semisubmersible processing facility, to be anchored in water depths of up to 240m, will be one of the largest ever constructed and the first in Australian waters, Townsend says; the 42in, 885km pipeline to Darwin will be the longest subsea pipeline in the Southern Hemisphere.
‘The big challenges are the size of the project, and the remoteness,' he says. ‘We've conscientiously chosen to use existing, proven technology rather than step out and try to do something fancy, simply because everything is so massive.'
The company's first field development concept envisioned a much shorter export line to a new LNG plant at one of several possible sites on the Kimberley coast of Western Australia. In 2004, the company had narrowed the proposed location down to a site in the Maret Islands. But protracted land use negotiations failed to produce an agreement between indigenous Aboriginal land owners, environmentalists, Inpex and the WA government, then led by premier Geoff Gallop and his successor, Alan Carpenter. Inpex and Total opted instead to route the gas to Darwin.
Shortly after taking office in 2008, current WA premier Colin Barnett tried unsuccessfully to persuade Inpex to reconsider its plans. But Barnett is pushing ahead with a controversial proposal for an LNG hub at James Price Point to serve the Woodside-operated Browse LNG project (OE last month). In an April 2010 speech in Houston, Barnett complained bitterly of the previous administration's inability to secure the ‘$21 billion Inpex project'.
Inpex officials have played down the inter-state rivalry, insisting that the choice was not a rejection of WA but based instead on the available infrastructure in Darwin, which would allow the company to meet its production timeline.
Townsend, likewise, expresses little regret for the change of venue. ‘The Kimberley region is very remote – there's no population center at all, and lots of environmental and land access challenges,' he says. ‘Darwin is not as close, but it already has an existing LNG plant. It's got a pro-developmentgovernment, the population is supportive, there's a rail port and a major airport. Also, the federal government is keen to see the area develop,' he says.
The LNG rush underway in Australia has raised concerns of a looming labor shortage. When the Ichthys construction phase kicks off next year, Inpex estimates that it will need up to 1000 personnel for the offshore portion of the project at peak construction, with about 300 permanent staff; onshore, more than 2000 people will be working during the construction phase with another 300 positions to fill during the operational phase.
‘As you can imagine, in Australia there's a lot of competition for LNG skills,' Townsend says. ‘And we're starting to look at operations also. So recruitment is a big focus.'
He adds: ‘We will be competing for scarce (human) resources with all of the other big projects going on. We're ramping up our recruitment this year. Final investment decision comes at the end of year, so the next phase is really the detailed design and construction phases. We'll be looking for fabrication yard personnel. Those yards haven't been assigned yet, but there's only a few that can build large marine infrastructure of this type. First gas is 4Q 2016, so it's a five-year construction phase from the time of FID to first gas, and another year to completion of the entire facility.'
Most of the heavy fabrication will be conducted overseas, he says. The field development calls for modular engineering. ‘Labor shortages in Australia have made modular construction the norm,' he says.
Townsend says the company is ‘keen to train local talent' for Ichthys' operational phase but will also be looking abroad for help, including current Inpex employees who ‘may be looking to make a change'. Inpex and other operators could get help from Charles Darwin University in Darwin, which is creating a school of oil & gas engineering. ‘I think it's fair to say we're part of a transformation in Darwin,' he says. ‘Darwin has a vision of becoming an oil & gas center for that region.'
The Browse Basin is home to two other planned LNG projects – Woodside's Browse and Shell's Prelude development – but Inpex plans to be the ‘first cab off the rank', Townsend says. That could give the company a leg up in recruitment, but it will be vying with several other major projects around the nation in various stages of development.
‘It's a very competitive market. Look at Gorgon, Pluto, Prelude, possibly. Browse LNG, Wheatstone, and the coal seam gas projects — that's a lot of jobs.' OE