TOKYO (Reuters) - Japanese energy developer INPEX Holdings Inc. <1605.T> said on Monday it planned to invest $5 billion to $6 billion to produce liquefied natural gas (LNG) from its Ichthys field in Australia to meet rising demand.
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Sign up for: Globe Headlines e-mail | Breaking News Alerts The news boosted shares in INPEX, created a week ago by the merger of Japanese oil developers INPEX Corp. and Teikoku Oil Co., by more than 6 percent.
INPEX aims to start producing the gas in 2012 after seeking an environmental examination by the Australian government this month, a company spokesman said. It plans to produce 5 million to 6 million tons of LNG a year to import to Japan, he added.
"The project will allow INPEX to make great use of Teikoku's skills on LNG," Okasan Securities analyst Yoshihisa Miyamoto said. "The timing also shows the management's ability to quickly do business, and this should affect the stock positively."
Japan is the top LNG importer, absorbing about half the global supply of the clean fuel each year. LNG is gas that has been supercooled into liquid form for transport by tanker. A single shipment can deliver enough gas to supply a city the size of London for a week.
INPEX had said in the past it was considering a number of development schemes for its 100-percent-owned Ichthys discovery in the Browse Basin off the northwest coast of Australia, including LNG exports.
The company won a contract for the project in 1998 and has conducted drilling campaigns since. It expects gas reserves of about 10 trillion cubic feet, the spokesman said.
According to BP Plc
"Australia is a very important area for natural gas supply and is increasingly so because of its close distance from Japan and its political stability," the INPEX spokesman said.
The company will look for partners for the investment but has not yet decided how to finance it, another spokesman said.
RISING LNG DEMAND
The world's LNG market has grown rapidly on the back of strong demand for electricity produced by clean fuel and is expected to double by 2015, led by demand and supply from Asian countries, according to research and consulting firm RNCOS.
INPEX, which aims to lift its production by 50 percent to 560,000 barrels of oil equivalent per day by 2009, is also planning a 3- to 5-million-tonne-per-year LNG export project for its Masela gas discovery in Indonesia, starting in 2010.
"Demand for LNG has been increasing because of its environment-friendliness and high oil prices," the first company spokesman said, adding that electricity and gas providers would be the major buyers.
Shigemi Nonaka, chairman of Polestar Investment Management Co. Ltd., said the share move underlined the market's keen interest in the oil developer.
"INPEX is a company that investors pay very close attention to after oil prices have risen so much, and it is not surprising to see it getting this kind of attention at the moment," he said.
"There are also expectations that oil prices will remain high for some time, and that also could be boosting its popularity," Nonaka added.
LNG prices have been high, driven by an unusually frigid winter and European outages.
In late January, Kansai Electric Power Co. <9503.T>, Japan's second-largest utility, bought an Oman LNG cargo at above $19 per million British thermal units (mmBtu), thought to be the highest spot price ever paid in Japan, industry sources have said.
South Korean importer KOGAS <036460.KS> was said to have paid more than $20 per mmBtu for another Oman cargo, with both companies scouting for more supplies to build up stocks, the sources said.
Shares in INPEX closed up 6.03 percent at 1.23 million yen. The Nikkei average <.N225> ended down 0.61 percent.
(Additional reporting by David Dolan)
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