Reuters: Ichthys LNG Project Still Above Break-Even-Point Despite Oil Plunge

The $34 billion Ichthys liquefied natural gas (LNG) project in Australia is still above its break-even-point despite a six-month plunge in global oil prices to around $50 a barrel, said the top executive of project operator Inpex Corp.

When Inpex made its final investment decision (FID) in 2012, Brent crude was hovering around $110 a barrel, but Inpex is not worried about the profitability of Ichthys even though global crude prices have lost more than 50 percent of their value since June last year, Inpex President and CEO Toshiaki Kitamura said in an interview with Reuters on Friday.

"We have confidence in the project's profitability," he said, adding that oil prices have not fallen below its break-even-point. Current oil prices are within the expected range, he said, without giving any specific details.

Most Australian LNG exports are sold under long-term contracts linked to global oil prices.

The Ichthys project, which was 58 percent complete as of last September, is progressing on schedule to start production by the end of 2016, Kitamura said.

The energy boom in Australia has led to labour shortages and cost blow-outs, and there's a risk of cost-overruns, but Ichthys is in a comparatively better situation with 75 percent of the project awarded on a lump-sum basis, he said. MORE