INPEX, Japan's largest oil explorer, has picked Darwin as the site of a proposed $US20 billion ($24 billion) natural gas project that would be Japan's biggest investment in Australia.
Inpex and its partner, Total, will decide whether to build the Ichthys liquefied natural gas project late next year or early in 2010 and production could start in late 2014 or early 2015, the company said.
The partners dropped an earlier plan to build the plant off Western Australia, closer to the offshore gas field.
The fuel will be shipped to Japan, the world's largest liquefied natural gas consumer, where demand from power producers may rise 21 per cent by 2030.
Inpex's estimate of the cost of the project is more than double the latest estimate by the Northern Territory Government.
"Initial project costs may have grown by a few billion dollars to build a longer pipeline spanning the Ichthys field and terminating in Darwin, but rising LNG sale prices will easily help Inpex absorb incremental costs," said Lalita Gupta, an analyst at Morgan Stanley in Tokyo.
The partners would start initial plant engineering work soon, Inpex said. The plant will be designed initially to produce more than 8 million tonnes of liquefied natural gas a year, as well as 1.6 million tonnes of liquefied petroleum gas and 100,000 barrels a day of condensates, a type of light oil.
Should the Ichthys project go ahead, it would boost jobs and business opportunities in the Darwin region, said the Minister for Resources and Energy, Martin Ferguson.
"The reserves are sufficient to support a major LNG export project for decades to come," Mr Ferguson said. "I hope this project will be one of many established over the next few years as we continue to unlock the wealth from Australia's immense gas and energy resources."
Global consumption of liquefied natural gas is set to increase 10 per cent a year until 2015, more than five times the estimated gain in crude oil demand, as power generators switch to cleaner fuel.
The Ichthys project, which will have a life of at least 40 years, is one of about 10 proposed liquefied natural gas ventures in Australia, which has two operating plants and another under construction.
Earlier this year Inpex and Total started studying the Blaydin Point site near Darwin amid opposition from environmental groups to their originally preferred location on the Maret Islands off Western Australia, closer to the Ichthys field. The partners would have had to negotiate an agreement with local Aboriginal communities to build the plant in WA and would have had to supply some of the gas to the local market.
The selection of Darwin means they will need to build an 850-kilometre pipeline to transport gas, raising project costs.
Inpex owns 76 per cent of Ichthys, while Total, Europe's third-largest oil company, owns the rest.
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