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Thursday, Oct. 19, 2006

Inpex to drill for Indonesian gas

Field expected to yield 3 million tons a year starting in '14


Staff writer

Inpex Holdings Inc. said Wednesday it plans to develop a gas field in southern Indonesia to produce about 3 million tons annually beginning as early as 2014 in a bid to ensure Japan has a steady supply of liquefied natural gas.

The move came after Russia suspended in September part of Sakhalin-2, an oil and natural gas development project run by a consortium set up by companies in Japan, Britain and the Netherlands.

As LNG demand increases, especially in Europe and the U.S., it is becoming increasingly tough for Japan to secure a steady import, analysts say.

Inpex Holdings spokesman Kazuya Honda said the company is planning to dig four wells at the end of this year or early next year in the Abadi gas field in northern Australia to find out how much reserve there is. Inpex owns 100 percent of the Abadi gas field.

Inpex, owned 29.35 percent by the Japanese government, first drilled an experimental well in 2000 to find out if there was a gas field in the area.

"After we drilled two more wells in 2002, we decided there is enough natural gas to carry out full-scale exploitation," Honda said.

Inpex estimates the gas field can yield a minimum of 3 million tons per year. The company has yet to decide how much it will invest in the project, although earlier media reports said Inpex will kick in about 500 billion yen.

Honda said the company hopes to launch full-scale production between 2014 and 2016. The LNG will be imported to Japan and other countries. The company hopes to gain the green light from the Indonesian government in 2008.

Inpex is currently tapping two gas fields in Indonesia -- one in the east of Kalimantan Island and another one on the island of New Guinea.

Japan imported about 58 million tons of liquid natural gas in fiscal 2005. The Abadi project could account for roughly 5 percent of annual LNG imports.

The plan follows the sharp setback Inpex suffered earlier this month when its stake in Iran's Azadegan oil field plunged from 75 percent to about 10 percent.

The firm had not started on the project as demanded by Tehran at a time when Iran is facing possible U.N. economic sanctions over its nuclear ambitions. Inpex also claimed the delay was due to Iran's failure to remove land mines left over from the Iran-Iraq war.



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