Total drops 4 pct interest in Ichthys project for $1.6 billion

French oil major Total has signed an agreement to divest a 4% interest in the Ichthys liquefied natural gas (LNG) project in Australia to operating partner Inpex for an overall consideration of $1.6 billion, citing cost overruns.

The transaction, which is subject to Australian regulatory approvals, reduces Total’s interest in the asset to 26%, the French company said announcing the transaction on Thursday.

Arnaud Breuillac, President, Exploration & Production at Total, said: “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.

He said the final capital estimate provided by Inpex was around $45 billion, compared to an updated figure around 40 B$ in 2017. To remind, when Total and Inpex in January 2012 made the final investment decision for the Ichthys project, they said the development would cost $34 billion.

Commenting on Thursday, Total’s Breuillac said: “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.”

He added: “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. LNG is a core area for Total – the world second-largest privately owned player with a strong pipeline of low breakeven pre-FID projects in our portfolio”.

At full capacity, the Ichthys offshore facilities and the two-train onshore liquefaction plant will supply 8.9 million tons per year (Mt/y) of LNG and 1.65 Mt/y of liquefied petroleum gas (LPG), along with 100,000 barrels of condensate per day.

The first LNG cargo was exported on October 22, 2018, the first offshore condensate cargo was exported on October 1, 2018, and the first LPG cargo was exported on November 16, 2018. The two LNG trains are now fully operational. The first production from the Ichthys was almost two years late as it had been envisioned the production would start at the end of 2016.

Before the deal with Total announced today, Inpex, as the operator, had a 62.245% interest in the Ichthys LNG project. Other partners are CPC Corporation, Taiwan (2.625%), Tokyo Gas (1.575%), Osaka Gas (1.2%), Kansai Electric Power (1.2%), JERA (0.735%) and Toho Gas (0.42%).

Offshore Energy Today Staff