4

Special ReportSpecial Report:
Ichthys LNG Project and Gas Supply Chain

Delivering energy
from the ancient seabed ofAustralia for the future of Japan

Off the shores of Australia, roughly 6,000 km due south of Japan, work
has been progressing on the development of the large-scale Ichthys LNG
Project with the goal of starting production by the end of 2016. Natural
gas fields deep under the seafloor off the shores of Australia lie waiting
to supply Japan with approximately 10% of its annual LNG imports. Construction on the Naoetsu LNG Terminal in Niigata Prefecture has been
completed, the final piece of the supply structure for natural gas comingfrom Australia to Japan.

Ichthysgas-condensate
field

A U S T R A L I A

034

INPEX CORPORATION Annual Report 2014

Ancient Times

Modern Times

Roughly 200 km off the shores of Australia and Western Australia, at depths of
4,000 and 4,500 m, there are two geologic reservoirs of gas. These reservoirsof gas cover approximately 600 square
km, roughly the same area as the 23
wards of Tokyo. One or two hundred million years ago, at the height of the Jurassic period, these geologic stratum wereformed. Over a long period, these massive gas fields gradually came into being
and now lie sleeping under the sea off
the shores of Australia.

In the mid-1980s, INPEX entered
the field of offshore resource
development in Australia, accumulating knowledge, experience and research over the next
decade. In open bidding during
1997, INPEX placed the winningbid for the Ichthys block (WA285-P Block) after confirming
its considerable potential, andobtained operator rights to thearea in August 1998.

• First drilling campaign(2000-2001)• Second drilling campaign(2003-2004)• Appraisal well drilling(2007-2008)
Seismic survey
recording work
(1998, 2001, 2010)

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Special Report

Ichthys geologic stratum(graphic representation)

Gas was discovered in the Brewster Member 4,000 m undergroundand the Plover formation 4,500 m
underground.
(rendering)

2000 – 2004

2007– 2008

2009– 2011

In 2000 and 2001, INPEX conducted thefirst drilling campaign, drilling three exploratory wells that all confirmed the presenceof gas and condensate. INPEX then conducted three-dimensional seismic surveys.
In the second drilling campaign in 2003
and 2004, three more exploratory wells
were drilled, confirming the existence ofmassive gas and condensate fields under
the seafloor.

In 2007 and 2008, INPEX
drilled two wells to assess
recoverable reserves of gas
and condensate at Ichthys.
INPEX also decided on Darwin as the location to build
the LNG plant.

From 2009 until the final investment decision (FID) was
made in January 2012, the following preparatory development work was undertaken.
• In 2009, front-end engineering and design (FEED) work began.
• From July to September 2010, conducted a public review of theEnvironmental Impact Statement (EIS).
• May 2011, acquired the pipeline license.
• In 2011, obtained environmental approvals from the Northern
Territory Government and the Federal Government.
• Signed LNG sales contracts with eight LNG buyers, finishing
contractual agreements for the purchase of the entire annual
LNG production volume of 8.4 million tons.

INPEX CORPORATION Annual Report 2014035

Development Concept of the Ichthys LNG Project
Offshore Production Facilities
Product from development wells is collected in the subsea production system (SPS) andthen sent to the offshore central processing facility (CPF) through flowlines and flexible
risers. Gas and condensate are separated at the CPF, and the condensate is stored at a
floating production, storage and offloading (FPSO) facility until transfer to a tanker for
shipment. The gas, however, is transferred to an onshore liquefaction plant via a gas
export pipeline (GEP).

Shipment tanker
Floating production, storageand offloading (FPSO) facility

Condensate

Condensate is received from the CPF,
stored (storage capacity: 1 million barrels)and shipped (daily volume: 85,000
barrels at peak). Some natural gas ispressurized and returned to the CPF.

Natural gas(pressurized and returned to CPF)

Production well

Subsea production
system (SPS)

A total of 50 wells will be
drilled into the gas field.

Product

Production manifold

Equipment installed on theseabed that links together
several production wells.

2012

2013

In January 2012, INPEX made a final investment decision(FID) and began development work. In March, INPEX
was granted a production license, and in May, held asteel cutting ceremony
for the onshore gasliquefaction plant in
Darwin. In December,
INPEX signed project
financing arrangements
totaling US$20 billion.

In January, a steel cutting ceremony was held for the offshore central processing
facility (CPF). In February, liability insurance was arranged for related construction
facilities during the construction period. In June, INPEX signed contracts for thebuilding and ownership of LNG carriersand contracts for time charters to transport LNG. A steel cutting ceremony was
also held for the offshore floating production, storage and offloading (FPSO) facility, construction commenced on modules
for the offshore facilities and onshore
gas liquefaction plant, and construction started on bridges and tanks for the
FPSO steel cutting ceremony (June 2013)
onshore facilities.

Ceremony for the FID (January 2012)036

INPEX CORPORATION Annual Report 2014

Onshore Facilities
Onshore facilities comprise the gas liquefaction plant,
storage and product shipment facilities. Plans call forthe construction of the onshore facilities at Blaydin
Point, situated between the city of Darwin and the bay.

Central processing
facility (CPF)

Processes the product received
via the flexible risers from theproduction wells, separating it
into gas and condensate.

Pipes that send product fromthe seafloor to the CPF.

Product

Condensate and LPG is extracted fromnatural gas delivered by pipeline, andthe remaining natural gas is cooled tonegative 162 C and liquefied in twoliquefaction facilities. Cooling and liquefaction of natural gas (turning it into
LNG) reduces the volume to 1/600 theoriginal volume, making transportation more efficient.
Shipments from the onshore gasliquefaction plant will total 8.4 million
tons of LNG annually, 1.6 million tonsof LPG annually and 15,000 barrels ofcondensate daily (at peak).

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Special Report

Flexible risers

Onshore gasliquefaction plant

Gas Export Pipeline (GEP)The GEP is a 42-inch natural gas pipeline that will run
from the CPF to the onshore gas liquefaction facility in
Darwin. The pipeline is being laid at a maximum depthof 250 m over a total length of 889 km.

Natural gas
Natural gas

Flowlines

Product

IchthysWA-50-L/WA-51-L/WA-285-P

LNG: 8.4 million tons/year
LPG: 1.6 million tons/year
Condensate: about 100,000 barrels daily (at peak)
CAPEX

US$34 billion

Participatinginterests

INPEX 66.070% (operator)*, TOTAL 30%,
Tokyo Gas 1.575%, Osaka Gas 1.200%,
Chubu Electric Power 0.735%, Toho Gas 0.420%

Schedule

January 2012 final investment decision (FID),
plans to start production by the end of 2016
*Of this figure, 2.625% is being transferred to CPC.

Darwin

Northern
T rritory
Te

Timor Sea

Project Outline
Production
volumeapprox. 889 km

Location of Ichthys gass-co
ondensate fielld• Browse basin on nortthwestern continenttal
shelf offf coast of western Australia
ff• About 200 km
m offff western Australia
Block area
• WA-50-L/51-L block: 1,079 km2• WA-285
5-P
P block: 995 km2

City
y of Darwin(IN
NPEX Daarwin off
f ice)
ff

Watter dep
pt h• Block watter depth: 170­340 m• Water depth of marine production facilities:
about 250 m
10
00 km

200 kmThe Portof Darwin

Wicckham Point(Darwin LNG
G)Blladiin Poiint(Onshore facillity constructio
on site)Middle Arm
Peninsula

INPEX CORPORATION Annual Report 2014

037

2

3

1 4

5

6 7

Work Status in 2014 (as of July 2014)
Projects to advance important work are becoming moretangible in 2014.
In February, full-scale assembly work began on thehull of the floating production, storage and offloading(FPSO) facility, and assembly of the offshore central
processing facility (CPF) began in April. In June, work
progress crossed the 50% mark, less than two years andsix months after the final investment decision in January
2012. At the end of June, the gas export pipeline (GEP)
laying started. In July, development work progressedwith the launch of the FPSO hull and the start of themodule arrival for the onshore gas liquefaction plant.

038

INPEX CORPORATION Annual Report 2014

Onshore facilities

Completed Accommodation Village
for construction workers
Completed dredging of Darwin bay
Modules started to arrive foronshore gas liquefaction plant
Other

Work progress at 50% (June)

8

9 10

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11

12

13

Offshore production facilities

Started work assembling FPSO hullStarted work assembling CPF
To start drilling production wells
Gas export pipeline

Completed coating of steel pipes
Started laying gas export pipeline

14

1: Aerial photo of onshore gas liquefaction plant under construction in Darwin
2: Cutting-edge Castrone pipeline laying ship for deep-sea work; able to lay subsea
42-inch diameter pipelines
3: ENSCO 5006 drilling rig for production wells; plans call for drilling of production
wells to start in 2014
4: LNG tank at an onshore gas liquefaction plant under construction
5: FPSO assembly construction
6: Gas export pipeline laying work in progress in the Darwin coastal waters
7: FPSO hull launch
8: Plant module assembly work in progress at an onshore gas liquefaction plant
9: Landing facilities under construction for onshore gas liquefaction plant
10: Jetty for product shipment under construction at an onshore gas liquefaction plant
11: Accommodation Village for up to 3,500 construction workers for onshore gas liquefaction plant
12: Subsea production system under construction in the United Kingdom.
13: CPF under construction; Ichthys CPF measures 150 m by 110 m, with a total displacement of 140,000 tons, making it one of the largest in the world
14: Hull of the CPF

INPEX CORPORATION Annual Report 2014039

Procurement, construction anddevelopment work ramping up forstart of production by the end of 2016

Ratio of Lump-Sum Contracts:
Approximately 75%

Substantial Condensate and LPG

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

In addition to the 8.4 million tons of LNG per year, theproduction volume of the project calls for a maximumof 100,000 barrels of condensate a day and 1.6 million
tons of LPG per year.

Cooperation with
Oil Major

Features and strengthsof the Ichthys project

Development work is being advancedwith oil major TOTAL, which has a vast
amount of experience in LNG projects.

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

Sales of Entire LNG Production
Volume Completed
The signing of sales and purchase agreements
covering the entire production volume was completed
before the final investment decision (FID).

Secure Funding
Contracts with Reliable
EPC Contractors

In December 2012, the Company
signed project financing arrangements for US$20 billion,
thereby concluding its funding.

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

Onshore gas liquefaction plant under construction

Completed onshore gas liquefaction plant (rendering)2015 – 2016 Year-End(plant module construction, infrastructuredevelopment and facility construction atplant site, etc.)

Construction and equipment
installation of offshore facilities(CPF and FPSO construction,
gas export pipeline laying, etc.)

Plant construction
with module andother installation

Connection to
offshore facilities

Production well drilling

040

INPEX CORPORATION Annual Report 2014

Transport and saleof productConstruction andinfrastructure development

Start of production

Major Work Flow Until Start of Production

Commissioning

Construction and equipment installation
will continue at both offshore and onshore
facilities. Modules will then be installed atonshore facilities and connected to offshore facilities, followed by trial production
operations. After production commences,
LNG, LPG and condensate products will beshipped and sold to customers.

LNG produced at Ichthys (INPEX portion) is
transported from Australia to Japan via
the Naoetsu LNG Terminal
Naoetsu LNG
Terminal

As an LNG carrier for the Naoetsu LNG
Terminal, the Sayaendo-type LNG carrier
is currently being built with a tank capacityof 155,300 m3.

A

J

B
I

In February 2013, INPEX completed insurance
arrangements related to the construction periodsof the project’s onshore and offshore facilities.

Transportation days:
one-way is about 10 days
(Reference: It takes about
30 days from the U.S. Gulf
of Mexico to Japan)

Addressing risks and making
steady progress on projects(8.4 million
tons/year)
H
G F

C
D

To be delivered
to Japan(approx. 70% of
the total)

4ESpecial Report

Insurance Arrangements for
Facilities during Construction
Period Completed

Transportation distance:
about 7,000 km

LNG buyers(Million tons/year)

A Tokyo Electric Power
1.05

F Kyushu Electric Power
0.30

B Tokyo Gas
1.05

G Toho Gas
0.28

C Kansai Electric Power
0.80

H INPEX0.90

D Osaka Gas
0.80

I TOTAL (France)
0.90

E Chubu Electric Power
0.49

J CPC (Taiwan)
1.75

Upside potential insurrounding areas
The 11 exploration blocks surrounding Ichthys could leadto greater value in the future for the Ichthys LNG Project.

Ichthys LNG
Terminal
Route from Australia to Japan (Naoetsu LNG Terminal) (rendering)

many people are engaged
How do you go about managing the
Q How
in the framework for advancing Q operations of each base, which span
the development work?

Ichthys

Q&A

A

Seiya Ito

Director, Managing Executive Officer,
Senior Vice President of Ichthys Project Division

Excluding the EPC contractors, there
are 1,800 people on the Ichthys LNG
Project overall, of whom 40 are seconded from the oil major TOTAL (as ofJune 30, 2014). It is expected that thiswill increase up to a maximum of around2,000 for the overall project.

the world?

A

For the Ichthys LNG Project, we have assigned
a person in charge at each base. In addition tocarrying out detailed operations management,
we ascertain and manage the overall project
operations from the Perth office on the basis ofregular operational reports from each base. In
addition, a Technical Directorate and a Project
Coordination control overall operations in across-organizational manner.

INPEX CORPORATION Annual Report 2014041

Naoetsu LNG Terminal andNatural Gas Pipeline Network
in Japan

Outline of Naoetsu LNG Terminal Facilities
Unloading arms (wharf)

Two LNG tanks

Unloading equipment for moving LNG from Massive LNG storage tanks about 80 m in diamLNG carriers to onshore facilities.
eter and 50 m in height.

Full view of the Naoetsu LNG Terminal

Naoetsu LNG Terminal
INPEX’s portion of the Ichthys LNG Project will mostly
be received at the Naoetsu LNG Terminal. Construction
on the Naoetsu LNG Terminal began in July 2009, andit commenced operations in December 2013. Although
six months or so have passed since starting operations,the terminal has operated stably without any major incidents. Up until LNG is received from the Ichthys LNG
Project, INPEX will purchase a total of roughly one million tons of LNG, the equivalent of 17 LNG tanker vessels, from Chubu Electric Power Co., Ltd., and supply
natural gas to Japan.

042

INPEX CORPORATION Annual Report 2014

RGB (return gas blowers)

ORV (open rack vaporizer)

BOG compressors

Equipment that returns boil-off gas (BOG)
to LNG carriers, to modify pressure balance.

Equipment that warms LNG up to a natural
gas state. Seawater is used as a heating
medium.

Equipment that compresses
BOG from LNG tanks to makeraw materials.

LNG from overseas(Ichthys, etc.)

Naoetsu LNG
Terminal

Minami-Nagaoka
Gas Field, etc.

Domestic
Natural Gas

Domestic Natural Gas /Regasified LNG

Natural gas
transport pipelines

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Special Report

LPG tanks
Storage tanks for LPG used to modify the calorific value ofnatural gas.

Location

12 Yachiho, Jyoetsu,
Niigata Prefecture

Area

Approx. 25 ha

Gas production 7.5 million m³/d
capacity(LNG 240 tons/hour)
LNG tanks
LNG receiving
capacity

180 thousand kl

Building a Gas Supply Chain (rendering)2(upgrade possible)

approx.
1.5 million tons/year

Central Control RoomAll equipment and operations within the terminal
facility are monitored and controlled from a central
location.

Building a Gas Supply Chain
Since the 1960s, INPEX has maintained apipeline network for the transport of naturalgas. This pipeline network now extends a
total of 1,400 km, crossing seven prefecturesand one metropolis in the Kanto-Koshinetsu
region.
To address domestic demand for natural gas, which is likely to grow strongly,
INPEX is building out a gas supply chainthat will link together the following:
1 Natural gas received at the Naoetsu
LNG Terminal, etc.;

2 Natural gas mainly in Niigata Prefecture;and3 Natural gas transport pipelines.

INPEX will be the first company in Japan
to be involved in every facet of natural gas
operations from upstream to downstream
activities including development, production, liquefaction, transportation, gasification and supply, as well as the ownershipand operation of its own overseas gas fields.
While building a gas supply chain, INPEX
will work to expand its natural gas businessfurther over a broader region.

INPEX CORPORATION Annual Report 2014043

Successful start-up of theIchthys LNG Projo ect and othersojBecome a top-classinternational oil
and gas E&P
company after
the oil majors

Establishment of our
natural gas supply chain
with the Naoetsu LNG Te
T rminal anda domestic natural gas pipeline network

Future Growth
The Ichthys LNG Project will produce natural gas fromunder the sea of ancient Australia. INPEX is also building
a gas supply chain for delivering natural gas throughout
Japan. We are taking solid steps toward our Medium- to
Long-Term Vision that targets net production volume ofone million boed and domestic gas supply volume of 2.5
billion m3 in the early 2020s.
The launch of this large-scale project will propel INPEX
into the top ranks of the internationally competitive oil andgas E&P companies. By building a natural gas supply chain
using gas infrastructure in Japan, INPEX is evolving into an
integrated energy company that reliably supplies energy.

044

INPEX CORPORATION Annual Report 2014

Long-Term Outlook for Net Production Volume andDomestic Gas Supply Volume
Net production volume of one million boed
Domestic gas supply volume (billion m3)

1.63

1.65

1.72

1.76

1.75

1.80
Domestic gas supply volume

Newprojects

2.5 billion m3
Net production volume (thousand boed)

Existing
projects

405

405

423

426

408

409

411

421

472

Daily
volumeabout
700,000
barrels

2009

2010

2011

2012

2013

2014

2015

2016

2017

Early 2020s