Inpex plans ‘countermeasures’ to ensure Middle East oil shipments – CEO
Japan’s largest upstream company Inpex, which pumps the majority of its equity crude production in the Middle East, has plans for “countermeasures” to protect its shipments should tensions in the region escalate in the wake of the recent ship attacks, President and CEO Takayuki Ueda told S&P Global Platts.
Describing the attacks as “very shocking news,” Ueda said: “We are watching very carefully the progress in the Strait of Hormuz area.””Until now, the incident has no impact on our daily operations in that region,” Ueda said in an interview Sunday on the sidelines of the G20 energy ministerial meeting in Karuizawa, Japan.
Inpex equity production averaged 424,000 b/d of oil equivalent in its fiscal year ended March 31, with 231,000 boe/d or about 54% coming from the Middle East and Africa.
“We have countermeasures in place against such incidents,” Ueda said, adding that Inpex is “working closely” with state-owned Abu Dhabi National Oil Company and the Japanese embassy over the situation.
“While the Strait of Hormuz has traditionally been a geopolitically contested area, Abu Dhabi and the UAE — where the majority of our exploration production activities in the Middle East are based — remain regional bastions of stability and security,” Ueda said.
PIPELINE TO FUJAIRAH
“We also have an additional advantage of being able to channel crude oil produced from Abu Dhabi onshore concessions to the port of Fujairah, thereby circumventing the Strait of Hormuz and providing an added measure of security and stability of our customers,” Ueda said.
A 1.5 million b/d pipeline links Abu Dhabi’s onshore fields to the port of Fujairah.
But in the event of military action near the Strait of Hormuz, Ueda said Inpex would face “serious difficulty” shipping from Fujairah, as would most other international oil companies.
“I think we have some countermeasures to deal with it,” Ueda said. “We’re not entering into the stage of actually exercising such countermeasures at this moment.”Fujairah is one of the world’s biggest bunkering hubs and lies just outside of the Strait of Hormuz, a critical chokepoint through which 30% of the world’s seaborne oil transits, giving it a strategic location for oil trading.
‘MILESTONE’ DEAL WITH INDONESIA
On the sidelines of the G20 meeting in Karuizawa, Inpex signed a heads of agreement with Indonesia’s energy minister for its operated Abadi LNG project, which involves the Abadi gas field development in the Masela block in the Arafura Sea. Ueda called it a “milestone” development.
Inpex will now proceed to submit a plan of development to the Indonesian government for approval, Ueda said. If approved, the next stage would be front-end engineering design.
In an interview with Platts on Saturday in Karuizawa, Indonesia’s minister of energy and mineral resources Ignasius Jonan said he expected Indonesia would sign the POD for its giant deepwater offshore Masela block with Inpex during the G20 Osaka summit over June 28-29.
“The decision is a combination of onshore and offshore [facilities]. So the production target will be 9.5 million mt/year of LNG plus 150 MMcf/day [of gas] for onshore,” said Jonan, adding that first production is expected in 2027.
Inpex now expects a final investment decision on the Abadi project in about two to three years with a view to starting up in the late 2020s, Ueda said.
BOOSTING EQUITY OUTPUT
Inpex expects to boost its production to around 700,000 boe/d after Masela starts up, Ueda said, driven by the Australian Ichthys LNG project, which Inpex operates, and Abu Dhabi oil fields, among others.
Describing Abu Dhabi as Inpex’s “core area,” Ueda said: “We try to expand the activities in Abu Dhabi.””We will continue to work closely together with ADNOC as partners to increase the production capacity at oil fields in Abu Dhabi, where we have stakes,” Ueda said.
The partners in Upper Zakum — ADNOC (60%), ExxonMobil (28%) and Inpex’s wholly owned subsidiary Japan Oil Development Company or JODCO (12%) — aim to increase oil production capacity to 1 million b/d by 2024, Ueda said.
At the Lower Zakum oil field, in which JODCO has a 10% stake, the partners are targeting 450,000 b/d capacity by 2025.
At the Abu Dhabi Onshore Concession, in which JODCO has a 5% stake, Ueda said that “we think that by the end of 2020 production will reach 2 million b/d.”
After being awarded the operatorship earlier this year of the onshore block 4 in Abu Dhabi’s first-ever bidding round for exploration blocks, Inpex is now considering the emirate’s second exploration licensing round, Ueda said.
“If we consider the relationship with Abu Dhabi, we are very much interested in the second bidding round,” Ueda said. “We actually got some data from Abu Dhabi and we’re in the process of analyzing that data. We have also started some discussions with our partners on whether we actually entering into the new bidding round or not.”