Inpex is sticking to its guns when it comes to the projected US$34 billion estimation for the Ichthys liquefied natural gas (LNG) project in the Northern Territory in the wake of speculation of a possible cost overrun.

The Inpex-operated project, which passed its 50 per cent construction completion mark in August, was in the spotlight recently after reports emerged doubting the original projected capital cost, which was announced when Ichtchys received a positive final investment decision in 2012.

The industry speculation came after construction firm UGL revealed in a market update that the power station it is helping to build for the onshore component of Ichtchys in Darwin had been subjected to a range of project changes and events in the design and procurement phase. Those changes resulted in delays and increased the joint venture works to $US170 million.

UGL said the JV and JKC – the client for the project – were engaged “in a series of meetings aiming to close out these issues by year-end 2014 or early 2015 and also to accelerate the project to recover the delays”.

Despite the setback for the power plant, Inpex reaffirmed its original cost estimation for the mega-project.

“We’re confident the issues related to cost for that component of the project will have no impact on the overall project budget,” a Inpex spokeswoman told Oil and Gas Investor Australia. “The Ichthys LNG project remains on schedule to commence production by the end of 2016.”

Inpex is strongly standing by its original cost estimations amid market chatter that the development could blowout beyond $US40 billion.

New York-based brokerage firm Stanford Bernstein recently said in a note that Ichthys could run 30 per cent over budget and may not produce first gas until 2017, according to the Australian Financial Review.

Ichthys has flown in the face of some of the other mega LNG developments in Australia which have suffered from cost blowouts and project delays in recent years, such as Chevron’s Gorgon project off the northwest coast of Western Australia. At the South East Asia Australia Offshore and Onshore Conference held in Darwin earlier this year, Inpex external affairs general manager Bill Tonwsend bemoaned the excessive discussions about Australia’s high cost investment destination being played out among the industry.

“There is in my view too much attention [being] paid to construction costs and budget,” he told delegates at the event. “If public discourse is to be believed, these two measures alone are almost what exclusively determine whether or not an LNG project is good or successful.

“The media hypes cost blowouts and project delays, all the while painting a grim picture of Australia’s productivity.”

The Ichthys project recently completed a major milestone after the riser support structure tower was installed at the Ichthys field.

The completed RSS will be a physical, fixed support for flexible risers and dynamic umbilicals that connect subsea gathering systems to the project’s semi-submersible central processing facility, currently under construction in Korea.

The project, a joint venture between INPEX, French major Total and the Australian subsidiaries of Tokyo Gas, Osaka Gas, Chubu Electric Power and Toho Gas, is expected to produce 8.4 mtpa of LNG 1.6 mtpa of LPG, along with more than 100,000 bbl/d of condensate at peak.

Lauren Barrett can be reached at lbarrett@hartenergy.com.