SPECIAL REPORT

4

Special Report

Contributing to Future
Supplies of Energy to Japan
Japanʼs low energy self-sufﬁciency rate demands stableand efﬁcient supplies of energy, and in recent years environment-friendly,
clean energy with low CO2 emissions has been needed more than ever.
Through these Special Report pages of Annual Report 2013,
we would like to provide more details: in Special Report 1 on
the potential of unconventional resources and renewable energy and
INPEXʼs activities, all of which are attracting attention
and in Special Report 2 on the progress of the Ichthys LNG Project,
by which the Company will contribute greatly to the supply of energy to Japan.

Special Report 1` Shale Gas p. 45` Geothermal p. 46` Mega Solar p. 47` Methane Hydrate p. 47

Special Report 2` Ichthys LNG Projectpp. 48–55

044

INPEX CORPORATION Annual Report 2013

Special Report 1: Unconventional Resources and Renewable Energy#

1 Shale Gas

One kind of unconventional natural gas, shale gas is
the name given to the gas found in underground shale
beds. Involving the drilling of a well horizontally into
the shale beds, the production volume of shale gas ismaking great strides due to established gas recovering
technologies that artiﬁcially create a crack so that thegas can be extracted. The development potential of
shale gas is attracting attention throughout the world,
particularly in North America.
There are, however, points to bear in mind in thedevelopment of shale gas. These include the impact
on the environment at the time of development andthe mounting costs of development in comparison
with conventional gas ﬁelds. Furthermore, shale gas
must be liqueﬁed prior to being brought to Japan fromoverseas, which requires transportation costs in addition to liquefaction and transportation infrastructureand export licenses from the gas-producing country.
As part of its global gas portfolio, INPEX has participated in a shale gas project in Canada since 2011.
Although there are issues with Canada such as infra-

structure, the country offers advantages that include
substantial reserves, a government that takes a moreaggressive approach toward LNG exports, and its relatively proximity to Japan after LNG conversion. INPEX
expects this shale gas project to become a new supply
source of LNG for Japan and is looking into the possibilities of LNG conversion while making progress withstudies.

Shale gas project in Canada (Horn River area)

4
Special Report

Conventional natural gas
Conventional oil

Shale beds

Shale gas

INPEX CORPORATION Annual Report 2013

045

#

2 Geothermal Power Generation

Geothermal power generation involves
using the heat energy of volcanic
magma to create steam, which turns
turbines, and to thus generate power.
Geothermal is also gaining attention asa precious clean energy source becauseof its low CO2 emissions during power
generation and its ability to generate
power stably without climate or seasonal effects compared to the othertypes of renewable energy.
A land of volcanoes, Japan is said
to have appreciable geothermal energy
supplies of approximately 20 million
kilowatts (kW), the worldʼs third-largest
source after Indonesia and the UnitedStates. However, the total amount of
power generated by the geothermal
power plants in operation in Japan is
only around the 0.5 million kW unit
level. Furthermore, as many of the areas
with geothermal potential are locatedin national parks and hot spring areas,
geothermal development requires

paying heed to such aspects as environmental regulations and gaining theunderstanding of local communities.
Since 2011, INPEX has been participating in joint studies into geothermal development in both Akita andHokkaido prefectures. The Company
is conducting a large number of drilling operations, including the drilling ofboth exploratory and production wells
for geothermal power generation. The
Company subsidiary Teiseki DrillingCo., Ltd., conducted the drilling of theﬁrst geothermal power production wellin Japan. The technologies needed forgeothermal development activities,
which include looking for undergroundsources and the drilling of wells, are thesame as those utilized for oil and natural gas development; INPEX is also able
to leverage its technological strengths
and experience. In the years to come,INPEX will be exploring the possibilities
of geothermal power development not

only in Japan but also in the Companyʼscore areas overseas, including Indonesia, which possesses the worldʼs largest
source of geothermal energy.

Fumarolic testing at a geothermal well
(Teiseki Drilling Co., Ltd.)

TurbineGenerator

Cooling
tower
Condenser

Steamseparator

Brine tank
Production well

Injection well

Geothermal reservoir

Magma

046

INPEX CORPORATION Annual Report 2013

External
air

Substation

#

3 Mega Solar

In photovoltaic power generation, large-scale systems
with an electric generating capacity of 1 megawatt (MW)or more are called Mega Solar facilities. Since the Great
East Japan Earthquake, expectations have been growing that photovoltaic power generation will help toward
dispelling anxieties about power supply shortages. The
construction of Mega Solar facilities comprising ranks ofmany photovoltaic panels over a wide area is being promoted in several areas throughout Japan.
INPEX Mega Solar Joetsu̶in the city of Joetsu,
Niigata Prefecture̶that has a maximum electric generating capacity of 2 MW. The Companyʼs ﬁrst photovoltaic
power generating system, INPEX Mega Solar Joetsuʼsphotovoltaic panels were installed on the site of theCompanyʼs old reﬁnery. Power generation operations
started in March 2013.

#

4 Methane Hydrate

Another kind of unconventional natural gas, methane
hydrate has a solid crystalline structure of water in whichmethane molecules are trapped, giving rise to the name“combustible ice.” As methane hydrate is stable in lowtemperature and high-pressure environments, sources
are found under the permafrost layer onshore, and at
depths of more than 500 meters offshore. The presenceof methane hydrate in Japan and in the seas surrounding Japan is being conﬁrmed, and the substance is
expected to be one of the countryʼs future gas sources.
However, due to the technical challenges involved in
extraction from low-temperature and high-pressure
strata, it will reportedly be some time before economically justiﬁable development technology is established.

4

INPEX Mega Solar Joetsu

Special Report

Combustible ice

Methane hydrate beds

INPEX CORPORATION Annual Report 2013047

Special Report 2: Ichthys LNG Project Status

Progress Status
DarwinIchthys gas-condensate ﬁeld

Under development by the Company,
the Ichthys LNG Project is a large-scale project to produce
approximately 10% of Japanʼs annual LNG import volume.
Work has been proceeding smoothly
since the Final Investment Decision (FID) in January 2012.
The work carried out in 2012 centered on
the detailed engineering of facilities and procurement.
From early 2013, we started construction of the offshore production
facilities and the main modules of the onshore gas liquefaction plant, andprocurement as well as construction work will be ﬁnally in full progress.
Contributing to future supplies of the worldʼs energy to Japan–
through these Special Report pages of Annual Report 2013,
we would like to provide more details about the progress ofwork realizing the Ichthys LNG Project and the work in each area.

048

INPEX CORPORATION Annual Report 2013

Project Timeline
1998

Participated in open bid, permit acquired` Submitted bid in open bid process conducted by the Australian Federal Government in March;permit for Block WA-285-P acquired in August of the same year

–

2000
2004

` Undertook ﬁrst drilling campaign, conﬁrmed presence of gas andcondensate in all three exploratory wells` Conducted 3-D seismic survey` Undertook second drilling campaign, conﬁrmed areal extensionof reservoir and presence of gas and condensate by drilling three
exploratory wells

–

2007

` Conﬁrmed extension of the Ichthys gas-condensate pool throughfurther drilling of two wells` Selected Darwin for LNG plant site

2009

Preparation for development

–

2008

2011

` 2009: Started front-end engineering and design (FEED) activities` July–September 2010: Public review of Environmental Impact

Statement (EIS) conducted` May 2011: Pipeline license acquired` 2011: Environmental approval received from Northern Territory

government (May) and from Australian Federal Government (June)` December 2011 to January 2012: LNG sales and purchaseagreements (SPAs) were signed with eight LNG buyers covering
entire production volume of 8.4 million tons completed

2012` January: Final Investment Decision (FID) made,start of detailed engineering and procurement` March: Production licenses granted` May: Groundbreaking ceremony at gas liquefaction plant (Darwin)` December: Project ﬁnance agreement signed

2013` January: Steel cutting ceremony for Central Processing Facility (CPF)` February: Insurance arrangements for major facilities during

construction period concluded` June: Contracts for the building and ownership of new LNG

vessels related to LNG transportation and of ﬁxed-term shipcharters concluded` June: Steel cutting ceremony for ﬂoating production storage andofﬂoading (FPSO) facility` Construction of offshore facilities and onshore gas liquefaction

modules` Construction of piers, tanks, etc. at onshore facility

–

2014
2016

` Drilling of production wells` Transportation and onsite installation of facilities` Commissioning` Production startup by the end of 2016

Offshore Production Facilities
Offshore production facilities comprise: a Subsea Production System(SPS), which includes the well heads that will carry out production
from the production wells on the sea ﬂoor: umbilicals, risers and ﬂowlines (URF) that transport the product; the Central Processing Facility(CPF) that processes the product received via the ﬂexible risers fromthe production wells, separating it into gas and condensate; and theﬂoating production storage and ofﬂoading (FPSO) system that storesand ships condensate. The Company started construction work onthese facilities in 2013.

` Started construction work of main facilities(CPF, FPSO) in 2013
` Production well drilling scheduled tocommence in 2014

Steel cutting ceremony for CPF (Geoje, South Korea)
January 2013, at the Samsung Heavy Industries shipyard. Measuring around
150 meters by 110 meters and with a displacement of 140,000 tons, thissemi-submersible production facility is the largest of its kind in the world.

Floating Production,
Storage and Ofﬂoading(FPSO)

CentralProcessing
Facility(CPF)

Gas Export Pipeline
The approximately 900-km-long gas export pipeline will run from theoffshore CPF to the onshore gas liquefaction plant at Darwin. The
42-inch diameter pipe will pass along the sea ﬂoor at a depth of around
250 meters. The detailed engineering of the gas export pipeline andthe manufacture of its steel pipes are already completed. Following
coating work, the laying of the steel pipes will commence in 2014.

` Manufacture of steel pipes for the approximately

900-km pipeline completed` Following coating of the steel pipes,
pipe-laying to commence in 2014

Onshore Facilities
Comprising a gas liquefaction plant, storage facilities such as tanks
as well as shipping piers, onshore facilities are under construction at
Blaydin Point, which is across the harbor from the city of Darwin in
Australiaʼs Northern Territory. For this purpose, we are ﬁrstly advancing work on the preparation of the plant site and dredging work in
the Port of Darwin. Use of the workforce Accommodation Village has
already commenced, and 3,500 rooms will be completed in 2014.

` Construction commenced in various locationsof the world in 2013
` 3,500-room workforce Accommodation
Village scheduled for completion in 2014050

INPEX CORPORATION Annual Report 2013

Site of onshore gas liquefaction plant
Aerial view of the plant site. The engineering, procurement and construction (EPC) contract work for the onshore LNG plant is being carried out
by a Japan-U.S. joint venture, comprising JGC Corporation and Chiyoda
Corporation from Japan and U.S.-based KBR, Inc.

Steel cutting ceremony for FPSO (Okpo, South Korea)
June 2013, at Daewoo Shipbuilding & Marine Engineeringʼs shipyard.
A steel cutting ceremony was held to celebrate the start of construction
work.

Site for ﬂexible riser manufacturing
February 2013, Technip S.A.ʼs Le Trait plant. In the manufacturing process
for the hoses that will transport product from the sea ﬂoor to the CPF, a steel
catenary wire is wound into the hose to increase its strength.

Onshore gas liquefaction plant(Far left, left)
Unloading of steel pipes foruse on pipeline
Photos showing the unloading ofsteel pipes that have been transported to Kuantan in Malaysia forcoating work. The pipes manufactured in Germany and Japanare undergoing coating work inIndonesia and Malaysia.

Dredging work in the Port of Darwin
To secure the route to be taken by tankers and other vessels, a dredger isdeepening the sea ﬂoor in the area around the construction site in the bay.
The photo shows the dredger Athena.

Workforce Accommodation Village
Aerial view of the workforce Accommodation Village. The white buildings
are the workforce Accommodation Village dormitories that extend to 1,000
rooms.

INPEX CORPORATION Annual Report 2013

051

1

2

Australia (Darwin)

Australia (Perth)

LNG Plant Construction, Building ofWorkforce Accommodation Village,
Detailed Engineering Work in the Port of Darwin
In Darwin, onshore LNG plant construction work is being carried out by
a Japan-U.S. joint venture, comprising JGC Corporation and Chiyoda
Corporation from Japan and U.S.-based KBR, Inc. A Dutch company,
Van Oord Dredging & Marine Contractors BV, is advancing the dredging work in the Port of Darwin.

LNG plant

Project Management,
Detailed Engineering Work of GEP
Perth is responsible for the overall management of the project. Here,the branch ofﬁce of Saipem S.p.A. is undertaking detailed engineeringof gas export pipeline design work.

Dredging operations

Image of the completed LNG plant (left) and a photo of
the dredging operations in the Port of Darwin.

Engineers discuss the laying of the pipeline, which will be approximately
900-km long, from the Ichthys gas-condensate ﬁeld to Darwin.

Project Bases Span
the Globe

3

4
5
6

Detailed engineering and construction for the Ichthys Project isbeing undertaken by highly reliable EPC contractors all over the world.
Facilities constructed in several parts of the world are ultimately transported
and installed at the Ichthys LNG Project sites.

3

4

United Kingdom (Aberdeen)

Detailed Engineering Work of
Subsea Production System(SPS)
In the United Kingdom, GE Oil & Gas isundertaking the detailed engineering, procurement and manufacture of the SPS.

5The Netherlands (Leiden)

Detailed Engineering
Work of URF
In the Netherlands, McDermott and its subcontractor, Heerema Marine Contractors B.V.,
are carrying out detailed URF* design work.
* The abbreviation for umbilicals, risers and ﬂowlines, the equipment that connects the wellheads to the offshore CPF.

Germany (Mühlheim)
Kashima, Kimitsu

Manufacture of Steel Pipes
for Pipeline
The steel pipes for the GEP are being manufactured in Germany and Japan. Manufactured pipes are transported to Malaysia andIndonesia for coating.

GE Oil & Gas is also
manufacturing and testing the systemʼs 42-inch
connector parts at its
plant in Norway. These
will be used on theequipment that connects the ﬂexible risersfrom the CPF to the
42-inch pipes leading toDarwin.
Artistʼs impressions of the URF and CPF

052

INPEX CORPORATION Annual Report 2013

Sections of the 42-inch diameter steel pipes thathave been transported to Malaysia for coating

6

7

Monaco8

Malaysia (Kuala Lumpur)

Singapore

Detailed Engineering of
FPSO Turret

Detailed Engineering Work for
FPSOʼs Topside

The detailed engineering work of the turret̶
installed in the FPSO to moor the FPSO in aﬁxed position and to connect the ﬂexible risers to the FPSO̶is being undertaken at theMonaco ofﬁce of SBM Offshore N.V.

The detailed engineering of the FPSOʼs topside̶the oil or gas production facilities installed
on a shipʼs deck̶and of the FPSOʼs turret isbeing carried out in Kuala Lumpur, Malaysia,
by Daewoo Shipbuilding & Marine Engineeringand SBM Offshore N.V., respectively.

Image of the FPSO after completion. The overall
length of the FPSO is approximately 330 m.

Image of the FPSOʼs topside after completion

Detailed Engineering ofInstrumentation and Controls,
Construction of FPSO Turret
In Singapore, Yokogawa Electric Corporation iscarrying out the detailed engineering of instrumentation and controls, and SBM Offshore N.V.
is constructing the FPSO turret.

The FPSO turret steel cutting ceremony held inJanuary 2013 (Singapore)

11

United States (Houston)

9
5

10

11

The detailed engineering of the CPFʼs topside̶
installed oil or gas production facilities̶is being
undertaken in Houston by Mustang Engineering
L.P. (a Samsung Heavy Industries subcontractor).

4
Special Report

Detailed Engineering Work of
CPF Topside

7
8

1

2

10
Image of the CPF after completion

10

Yokohama
9Australia (Perth, Brisbane)

Detailed Engineering Work of
LNG Plant
South Korea (Geoje, Okpo)

Detailed Engineering andConstruction Work for CPF andFPSO Hulls

The detailed engineering work on the main
facilities for the onshore gas liquefaction
plant is being carried out at Yokohama inJapan and at Perth and Brisbane in Australia.

The detailed engineering of and construction work for the hulls of the CPF and FPSO is
being carried out in South Korea by Samsung
Heavy Industries and Daewoo Shipbuilding &Marine Engineering, respectively.
An artistʼs impression of the CPFʼs hull after completion. When installed at the facility, the CPF willmeasure 150 m by 110 m and be the largest semisubmersible production facility in the world.
Final checks of the detailed engineering are
carried out at the Yokohama engineering ofﬁce.

INPEX CORPORATION Annual Report 2013053

Ichthys LNG Project
Characteristics and Strengths
The characteristics and strengths of the Ichthys LNG Project that
set it apart from other LNG projects include its substantial condensate and LPG,
which raises economic efﬁciency; good coordination and relationship with
TOTAL of France, which has a wealth of project experience;and reduced risk of cost overruns due to a high ratio of lump-sum contracts.
Furthermore, for the year ended March 31, 2013, INPEX ensured funding bysigning project ﬁnancing agreements and completed the arrangement ofdamage insurance cover for the related facilities, the construction of which has just started.
By means of its fully prepared systems, INPEX will continue towork toward the start of production by the end of 2016.

Substantial Condensate and LPG
In addition to the 8.4 million tons of LNG per year,
the production volume of the project calls fora maximum of 100,000 barrels of condensate a day
and 1.6 million tons of LPG per year.

Approximately 75% of the amounts contracted with
the EPC contractors are lump-sum contracts, which areserving to reduce the risk of cost overruns.

Cooperation with
Oil Major

Sales of Entire LNG Production
Volume Completed

Development work is being advanced with oil major
TOTAL, which has a vast amount of experiencein LNG projects.

The signing of sales and purchase agreements
covering the entire production volume was completed
before the Final Investment Decision (FID).

Painstaking Pre-Development
Preparation
Having extended the front-end engineering anddesign (FEED) activities by one year, sufﬁcientengineering work has been undertaken and raised
the accuracy of the cost estimates.

Contracts with Reliable
EPC Contractors
The Company secured highly reliable EPC contractors
with track records in LNG projects.

054

Ratio of Lump-Sum Contracts:
Approximately 75%

INPEX CORPORATION Annual Report 2013

Secure Funding
In December 2012, the Company signed projectﬁnancing arrangements for US$20 billion,
thereby concluding its funding.

Insurance Arrangements for
Facilities during Construction
Period Completed
In February 2013, INPEX completed insurance
arrangements related to the construction periods ofthe projectʼs onshore and offshore facilities.

Response to Risk of
Cost Overruns,
Schedule Delays

4
How doo you
y go about managing the operations of each base, which span the world?

A.2

For the Ichthys LNG Project, we have assigned a person in charge at each base. In addition to carrying out
detailed operations management, we ascertain andmanage the overall project operations from Perth on
the basis of regular operational reports from each base.
In addition, a Technical Directorate and a Project
Coordination control overall operations in a crossorganizational manner.

Q.1

How many people are engaged in the framework for advancing the development work?

Q.3

Please tell us about the projectʼs upside
potential.

A.1

Excluding the EPC contractors, there are 1,400 people
on the Ichthys LNG Project overall, of whom 40 are
seconded from the oil major TOTAL (as of June 30,2013). Through the course of development work it isexpected that this will increase up to a maximum ofaround 1,700 for the overall project.

A.3

The area around the giant Ichthys gas-condensate ﬁeld
has high exploration potential. INPEX retains interests
in a total of 10 blocks surrounding the Ichthys ﬁeld,
six as an operator and four as a non-operator, andﬁnds have already been made in three of them. We
will continue our exploration and assessment activities
in the surrounding exploration blocks in the years tocome with a view to the joint development of Ichthys.

Q&A
Seiya Ito
Director,
Managing Executive Ofﬁcer,
Senior Vice President of
Ichthys Project Division

Timor Sea

WA-274-P
WA-410-P
WA-411-P

Special Report

Q.2

Ichthys

AC/P36
WA-343-P
WA-341-P
WA-344-P
WA-285-P
WA-494-P

WA-281-P
Ichthys gas-condensate field

Australia

INPEX CORPORATION Annual Report 2013055

What is the ultimate
renewable energy?
The development of various forms of renewable energy has been
attracting increasing interest in recent years. Regarded as theultimate renewable energy, there are high hopes for hydrogen,which only produces water at the time of combustion. At thepresent time, however, hydrogen is manufactured as a raw material using exhaustible resources such as oil. Research is therefore
being conducted into a revolutionary manufacturing method
where solar energy is used instead of oil to break down waterand obtain hydrogen.

H2

lar y
So ergEn

Hydrogen

O2
OxygenH2O
Water

Size of the Ichthys LNG Project
250

243 m

200 m or higher

200

150

100

65.45 m50

0Tokyo Metropolitan
Government Headquarters

Producing 8.4 million tons of LNG peryear, the Ichthys project requires a largescale production facility. Designed to
produce and process gas extracted
from subsurface, the ﬂoating production
facility known as the Central Processing
Facility (CPF) is more than 200 meters
high, making it the largest offshore facility in the world.

Ichthys LNG ProjectCentral Processing Facility(CPF)

National Diet Building, Tokyo

Graphic representation of the size of the Ichthys gas-condensate ﬁeld

SaitamaIchthys gas-condensate field
Tokyo
Chiba

An extremely large gas-condensate
ﬁeld, Ichthys covers an area of approximately 600 km2 and is around 40 km
along its longest axis and more than
15 km along its shortest. The graphic to
the right shows the area of the gas reservoirs superimposed on a map of Tokyo.

056

INPEX CORPORATION Annual Report 2013

Kanagawa

010km