Inpex, Chevron facing delays as worries grow on LNG start-ups

Inpex chief executive Toshiaki Kitamura told investors earlier this month that the Ichthys project was 68 per cent complete and confirmed the start-up for late 2016, a date reiterated by Inpex's head in Australia, Seiya Ito, last week.

But the overstretched shipyard has long been seen as a problem, with Ichthys managing director Luis Bon last year describing it as a "hot-point issue".

Inpex general manager external affairs Bill Townsend said on Friday that areas of the project were "somewhat behind" and pointed to the "heavy workload" at the Korean yards.

"Projects the size, scale and scope of the Ichthys LNG Project are complex and challenging," he said.

"Various types of work are being conducted simultaneously to develop Ichthys. There are some areas of the project where progress is somewhat ahead or behind, but we are continuing to work diligently towards the target of commencing production by the end of 2016."

He said Inpex was working closely with contractors "to ensure they meet our project schedule."

But Wood Mackenzie is assuming Ichthys won't start production until mid-2017.

Asia-Pacific principal upstream analyst Angus Rodger said the venture essentially comprises four separate massive projects, two huge offshore structures, an almost 900-kilometre subsea pipeline, one of the world's longest, and the two-train LNG plant being built in Darwin. Bringing them all together will be a big challenge.

Mr Rodger said management of the construction of the two offshore structures had been "especially difficult" and he believed the work in the yards was behind schedule.

Wood Mackenzie believes Wheatstone, in which Woodside Petroleum now has a stake, is also running late after a lengthy and costly site preparation phase, and is assuming startup only in mid-2017. Meanwhile, first production at Gorgon has slipped further to late 2015, while the second and third trains are likely to be slower to start up than planned, it believes.

Chevron Australia managing director Roy Krzywosinski last week reiterated the plan to start up the three LNG trains at Gorgon six months apart. But Wood Mackenzie said the gap might stretch to nine months, meaning full capacity won't be reached until late 2018.

The consultancy said the Queensland coal seam gas-based LNG projects could start production more successfully than the large conventional ventures. The schedule for the start-up of the CSG-based plants has slipped relatively little, although only one of the six LNG trains being built at Gladstone's Curtis Island has so far begun production.

Meanwhile, Woodside's confidence in a decision in the second half of 2016 to construct the Browse floating LNG venture is not being shared by several analysts.

Deutsche Bank's John Hirjee estimates the venture needs oil prices to be at least $US80 a barrel for the Browse venture to be viable, and noted the bank doesn't expect prices to reach that level for at least two years.

Macquarie Private Wealth said assuming oil prices of even $US78 a barrel, it calculated Browse would deliver a rate of return of only 10.3 per cent, below Woodside's threshhold of 12 per cent, and take 10 years to pay back.

Mr Rodger said Woodside's bullishness on the Browse project, comprising two or three FLNG vessels in a remote area, had taken quite a few observers by surprise,

"It will be interesting to see how they look to potentially re-engineer or rephase that so that it becomes a more capital-efficient or more attractive project," he said. "Browse, to actually make it to FID [final investment decision], has to be an extremely competitive project from a global economic perspective."