Japan's Inpex expects Abadi LNG final investment decision in 3-4 years

Japan's oil and gas explorer Inpex expects the final investment decision (FID) for the 9.5 million mt/year Abadi liquefied natural gas project off Indonesia's Maluku province in three to four years from now if all goes well, a company spokesman told S&P Global Platts on Aug. 12.

This puts the FID schedule at around 2024-2025, two years later than its previous expectations of a 2022-2023 time frame with production in the later half of this decade. This is the latest in a series of delays.

Abadi LNG ranks among Indonesia's four strategic upstream projects, and was initially expected to be sanctioned back in 2019, but faced several issues ranging from revisions to its initial project plan of being an offshore LNG terminal to more recent issues around its large carbon footprint.

"Given the growing global push toward decarbonization, we may need to consider redesigning the Abadi project with CCS or CCUS," Inpex's managing executive officer, Daisuke Yamada, had said at the company's results briefing held on Aug. 11.

Yamada also indicated that the pandemic had forced a site survey in preparation of front-end engineering and design work to come to a halt. These setbacks also likely added to the delays at Abadi LNG, which is the largest greenfield LNG project in Indonesia.

When asked whether the need for a carbon capture and storage (CCS) project had affected progress on LNG sales from Abadi, and whether a revision to the plan of development (POD) or project design will be needed, Inpex's spokesman said currently the company was not engaging in negotiations on specific conditions.

"We are providing prospective customers with introductions and updates on the project and gauging the level of interest and requirements. If CCS/CCUS initiatives are to be introduced, it is possible that the POD may need to be revised or renewed, but we will refrain from commenting further at this time," he added.

IHS Markit data showed gas found in the offshore Masela block, which will be tapped to feed the now proposed onshore LNG terminal, contains 9.7% carbon dioxide, which is above normal.

In July 2020, Indonesian upstream regulator SKK Migas' operations deputy Julius Wiratno told S&P Global Platts that Shell was in talks to withdraw from Masela and was looking for a buyer, which could either be Japan's Inpex, which is the operator of the development with a majority interest, or another interested party.

"We will refrain from commenting on Shell's reported divestment and the effects thereof. In principle, project financing prior to FID will be undertaken by each joint venture partner. After FID, upstream financing will similarly be undertaken by each joint venture partner while downstream financing will be carried out on a project basis following the Trustee Borrowing Scheme," the Inpex spokesman said.

"Our commitment remains unchanged," he added, when asked if Inpex still sees Abadi as the second pillar in its upstream portfolio after Ichthys in Australia.

"Shell does not comment on portfolio activity," a company spokeswoman said. Inpex is the operator of the Masela block with a 65% interest and Shell holds the remaining 35%.

"Shell continues to work closely with the operator INPEX to progress the Abadi project, having supported the approved 2021 work plan and budget. We are appreciative of the continued support of the Government of Indonesia and remain confident that the project will attract interest from credible investors," the spokeswoman added.