Angela Macdonald-Smith – Japanese oil and gas producer Inpex Corporation has written down the value of its Kitan oil field in the Timor Sea after the plunge in crude oil prices, signalling the decline in the outlook for one of the few petroleum fields providing revenue for Timor-Leste.
Inpex said it reduced the carrying value of its stake in the JPDA06-105 block holding Kitan by about 7.5 billion yen ($797.72 million), while it took a larger 27.5 billion yen write-down on its Joslyn oil sands project in Canada.
Kitan, operated by Italy's ENI, was discovered in 2008 and started production in October 2011. It is expected to have a production life of about seven years. Inpex, which is leading the large $US34 billion ($43.32 billion) Ichthys LNG project under construction in northern Australia, owns a 35 per cent stake in the venture.
The field is one of the few production petroleum ventures that provides revenue for the Timor-Leste government, being located in the Joint Petroleum Development Area, a region of water administered jointly by Timor-Leste and Australia.
La'o Hamutuk, a non-governmental organisation that monitors Timor-Leste's development, said payments from the venture into Timor-Leste's Petroleum Fund had fallen to about $US15 million a month, less than a quarter of their level in early 2013, as production declined from its peak in January 2013. Production was due to end in 2016, the organisation said.
"Impairment tests were conducted on assets related to the Joslyn oil sands project and JPDA06-105 block in the TImor Sea Joint Petroleum Development Area. Deteriorating market environments, based on such factors as the drop in oil prices, resulted in the recognition of the impairment losses," Inpex said late on Monday.
"As the current value of future cash flow generated from these assets is expected to fall below the carrying amount, Inpex will reduce their respective carrying amounts to recoverable amounts, posting the reductions as impairment losses."