March 15 (in-en.com) -- Inpex Holdings Inc. may start the Ichthys liquefied natural gas project in Australia before Chevron Corp.'s Gorgon venture as the U.S. company tackles soaring construction costs, Wood Mackenzie Consultants Ltd. said.

Ichthys, partly owned by Total SA, may be Australia's fourth LNG project, said Wood Mackenzie's Frank Harris. Existing plants include the North West Shelf venture and one near Darwin run by ConocoPhillips. Woodside Petroleum Ltd. plans to start its Pluto project in late 2010. Royal Dutch Shell Plc may join Ichthys, Harris said.

Asian LNG demand may more than double by 2020 to about 229 million metric tons, from 92 million in 2005, Wood Mackenzie estimates. Chevron and its Gorgon partners, Shell and Exxon Mobil Corp., last year dropped a 2006 deadline for approving the $10.4 billion project for development and haven't given a new timeline.

``In the last 12 months, Ichthys has emerged as a potentially world-class LNG project; it definitely has momentum,'' Harris, co-head of global LNG at the Edinburgh-based firm, said in an interview in Sydney. ``The real problem with Gorgon is cost. I'm not convinced we'll see a final investment decision this year.''

The Ichthys field, due to start production in late 2012 or early 2013, may hold as much as 50 percent more natural gas than earlier anticipated, Harris said. The venture is seeking to get fuel purchase accords from Japanese buyers this year, in advance of project sanction in the fourth quarter of 2008, he said.

`Chunky Field'

Located off the northwest coast, the field holds an estimated 9.5 trillion cubic feet of gas and 312 million barrels of condensates, a type of light oil, according to Tokyo-based Inpex's latest public estimate. The venture is planning an initial two units, of 3.8 million metric tons a year each, to be built on the Maret Islands at a total cost of as much as A$10 billion ($7.8 billion), Inpex said March 12.

The actual resource could be ``substantially bigger, which would make it a pretty chunky field,'' Harris said. Shell recently drilled a well, Prelude-1, in its 100 percent-owned adjacent permit, which may prove that the Ichthys field extends into its acreage, potentially giving it leverage to take a stake in the project at a later stage, he said.

Should Shell combine its other gas resources in the area, including from the Echuca Shoals and Crux fields, the total gas volume available for Ichthys LNG could approach 20 trillion cubic feet, Wood Mackenzie estimates.

Production Jump

Australian LNG production is set to jump 22 percent in the year ending June 30, to 15.2 million metric tons a year, worth A$5.4 billion, rising to 25.1 million tons, worth A$8.5 billion, in 2011-12 as new projects start up the Australian Bureau of Agricultural and Resource Economics said March 6.

The Woodside-operated North West Shelf venture is due to start up a fifth production unit late next year, while ConocoPhillips is seeking to expand its Darwin plant, which started up early last year. Woodside has started initial construction on Pluto, while BHP Billiton Ltd. and Woodside's Browse and Sunrise LNG ventures all are planning LNG projects.

``Gorgon was always going to be the next Aussie project where as Pluto has beaten it now, and the question is, can Ichthys overtake Gorgon?'' Harris said. ``It's not impossible. We're not there yet by a long chalk on Gorgon.''

LNG is natural gas chilled to liquid form, reducing to one- six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. On arrival it is turned back into gaseous form for delivery to users such as power stations, factories and households.

`Intense Evaluation'

Gorgon has become San Ramon, California-based Chevron's most expensive project and costs have risen beyond the previously estimated $10.4 billion Chief Executive Officer David O'Reilly said March 13 at an investor meeting. Gorgon will get ``intense evaluation'' to improve the outlook, he said.

Global LNG demand may more than triple by the end of next decade, to 509 million tons a year, from 141.5 million in 2005, Wood Mackenzie estimates. By about 2015, demand in the Atlantic Basin is due to overtake demand in Asia, where growth in emerging markets such as China and India may be slower than earlier anticipated, Harris said.

About 111 million tons a year of Asia's 2020 forecast LNG consumption are yet to be covered by supply contracts, Wood Mackenzie estimates. Due to doubts about the volume of future supplies from new and existing exporters such as Iran, Malaysia, Indonesia and Papua New Guinea, this available market may provide an opportunity for new Australian projects, Harris said.

``You've got significant un-contracted demand there; that's the prize that people are playing for,'' Harris said. ``If you can overcome the challenges, to me it seems as if Australia's got to be the heart of the solution here.''

Most of the opportunities for new LNG sale contracts through 2015 are in South Korea, while Japan needs ``serious volumes'' after that date, Harris said. BG Group Plc may supply LNG from the Atlantic Basin into north Asia to capture sales available in the period through 2012, while Qatar may supply fuel into Asia that was originally intended for the U.S. or U.K., he said.