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Total reduces its stake in Ichthys LNG by 4%
Ichthys is part of a wave of Australian LNG projects, which have unfortunately experienced major cost overruns and delays during their construction phase, according to Total.
Total announced that it has signed an agreement to divest a 4% interest in the Ichthys LNG project in Australia to operating partner INPEX for an overall consideration of US$1.6 billion. “The transaction, which is subject to Australian regulatory approvals, reduces Total’s interest in the asset to 26%.”
“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,” Total has reminded in its statement, adding that the final CAPEX estimate provided by INPEX is around US$45 billion to be compared to an updated figure around US$40 billion in 2017.
“In line with our capital discipline policy, we have therefore decided to control our capital employed in Ichthys by monetizing a 4% stake after the project start-up and de-risking,” Arnaud Breuillac, Total’s E&P president said, adding that “we are of course committed to the Ichthys project with our remaining 26% interest contributing to our growth both in production and cash flow from 2019 and beyond.”
According to the GLNGI’s Global LNG Database, the Ichthys project has seen several delays and cost overruns of billions of dollars due to technical difficulties as the start of production was originally slated for 2016. “The project 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 while the original target for production at Ichthys was 2016.”
On 8 Feb. 2018, Total CEO Patrick Pouyanne had revealed that Ichthys LNG project is likely to see further cost blowouts and possible delays in production as 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.
In a separate statement, INPEX confirmed that it has increased its participating interest in the Ichthys project from the current 62.245% to 66.245% as “the impact of this matter on the company’s consolidated financial results is minimal.”
The Japanese operator has also reiterated that the project “is a highly competitive one that is expected to generate stable revenue over the long term” and its acquisition of additional participating interest in the project is aligned to the company’s pursuit of its business targets outlined in “Vision 2040” and “Medium-term Business Plan 2018 - 2022” announced in May 2018.”
The Ichthys project commenced shipment of LNG in October and it is scheduled to gradually increase its production volume of LNG, and produce approximately 8.9 MMT/Y of LNG, equivalent to more than 10% of Japan’s annual LNG import volume, when it reaches its production plateau. Approximately 70% of the LNG produced by the project is scheduled to be supplied to Japanese customers.
Following Total’s divestment, shareholders of the Ichtys LNG project will be INPEX (Operator, 66.245%), Total (26%), CPC (2.625%), Tokyo Gas (1.575%), Osaka Gas (1.2%), Kansai Electric (1.2%), JERA (0.735%) and Toho Gas (0.42%)
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Source(s) GLNGI Staff, INPEX, Image courtesy of Total