Inpex Seeks Partners for LNG Projects to Raise Funds

By Shigeru Sato and Yuji Okada

Dec. 16 (Bloomberg) -- Inpex Corp., Japan’s largest energy explorer, wants to sell stakes in liquefied natural gas projects worth $30 billion in Indonesia and Australia as the global credit crunch curbs funding options.

“Almost all oil-majors and super majors have offered to jointly develop” the Abadi project in Indonesia, Chairman Kunihiko Matsuo said in an interview at the company’s headquarters in Tokyo. Inpex plans to sell part of its 76 percent stake in the Ichthys venture in Australia to Japanese utilities, he said without naming potential investors in the two projects.

The worst financial crisis since the Great Depression is forcing the explorer to look beyond its cash reserves and access to low-cost borrowing to almost double investment in the next five years. Total SA has a 24 percent stake in the $20 billion Ichthys project in Darwin. Inpex owns 100 percent of the Abadi field, where it plans the world’s first floating LNG plant.

“Bringing a super-major partner to augment technical competence if a floating LNG development is selected would seem completely logical,” said David Hewitt, a Tokyo-based energy analyst at CLSA Asia Pacific Markets. “Linking off-take agreements to minority stakes in LNG development projects is a well-trodden path for leading Japanese utilities.”

Inpex targets 2016 for the startup of the Abadi floating plant, which will cost more than $10 billion and produce as much as 4.5 million tons of LNG a year, said Matsuo, 73. The Indonesian government will complete screening the initial project plan in “several” months, he said.

Equity Financing

Matsuo favors building a floating plant after considering the cheaper option of shipping gas from the Abadi field to the Ichthys plant, he said. “Initially we planned to send gas to Darwin from Abadi through a pipeline, but the Indonesian government wants us to process gas at a plant in their territory,” he said.

Matsuo said the company’s investment plans won’t be affected by the global financial crisis, and cited access to cheap loans from the state-run Japan Bank for International Cooperation and cash reserves of about 500 billion yen ($5.5 billion). Inpex’s annual spending may increase above 600 billion yen in the next five years from an estimated 330 billion yen in the year ending March, he said.

“We’re not going to suspend or freeze our substantial investment for the Ichthys and Abadi projects,” Matsuo said. “First we are going to tap our 500 billion yen cash and rely on a dollar-denominated loan from JBIC, and if needed we would seek equity financing.”

Shares Decline

Inpex’s shares have lost more than half their value in the last six months, outstripping the 41 percent decline in the benchmark TOPIX index. They dropped 4.2 percent to 624,000 yen at 1:57 p.m. in Tokyo trading.

Inpex and partner Total plan to design the Ichthys plant with an annual capacity of more than 8 million metric tons of LNG, 1.6 million tons of liquefied petroleum gas, and 100,000 barrels a day of condensate, a type of light oil. Production may start in late 2014 or early 2015. The partners will decide whether to move ahead with the project late next year or early 2010 after initial engineering work finished.

Inpex wants to more than double its oil and gas output at home and abroad to as much as 1 million barrels a day by 2020, equivalent to a quarter of Japan’s current oil needs, Matsuo said. The company currently produces about 400,000 barrels a day.

Crude oil in New York has lost more than $100 after touching a record $147.27 a barrel on July 11. It traded at $44.60 at 2:05 p.m. in Tokyo.

The so-called super oil majors do business ranging from exploration and production to refining and retailing of oil products. They include Royal Dutch Shell Plc., Exxon Mobil Corp., BP Plc., Chevron Corp., Total and ConocoPhillips.

LNG is natural gas that has been cooled to liquid for shipping to markets beyond the reach of pipelines.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.