Japan's Inpex to develop Indonesia gas field

Tokyo: Japanese oil developer Inpex Holdings Inc said yesterday it will drill at four locations in eastern Indonesia this year to identify viable gas fields that could help resource-poor Japan reduce its reliance on Middle East oil.

The company has identified a gas deposit that could generate as much as three million tonnes of liquid natural gas (LNG), a year in an eastern Indonesian field in the Timor Sea, said Inpex spokesman Kazuya Honda.

But the company needs to do further drilling to verify the reserves before deciding on full-scale development, Honda said.

Japan's Nihon Keizai newspaper reported yesterday that the company plans to invest 500 billion yen ($4.2 billion) for the project by 2015 after submitting a production plan to the Indonesian government in 2008 for approval.

Undersea pipelines will carry the gas to a plant near the north Australian city of Darwin where it will be converted into LNG, it said. Inpex aims to ship 3-5 million tonnes of LNG annually to Japan and elsewhere.

The plan follows Inpex's announcement earlier this month of a sharp reduction of its stake in Iran's Azadegan oil field from 75 per cent to about 10 per cent due to slow progress in removing landmines from the area. Honda said the project in Indonesia is not designed to make up for the deficit at Azadegan.

Inpex plans to sign contracts with Japanese utility companies as well as Asian, European and US firms to buy the gas, the report said. It will ask major international oil concerns to help develop the field.

Inpex is also spending about 700 billion yen ($5.89 billion) in a separate project in Australia, in which the company holds a 76 per cent interest, with plans to produce six million tonnes of LNG a year starting in 2012. The two projects together could supply 15-20 per cent of Japan's LNG needs, the report said.

Urgency: Japan needs to secure stable LNG source

Japan faces an urgent need to secure a stable source of LNG also because the Russian Sakhalin-2 energy project, which Japanese and foreign firms were helping to develop, has been suspended due to differences over price and other issues.

Japan imported about 58 million tonnes of LNG in fiscal 2005, about one-third of that from Indonesia.