INTERVIEW: INPEX signs nonbinding deals for Abadi LNG amid strong interests in Asia -- CEO

Japan's INPEX has signed letters of intent with prospective LNG customers for its Abadi project in Indonesia amid strong interests in Asia, as it aims for a final investment decision in about two years following the start of front-end engineering design process, its president and CEO said.

In an interview with S&P Global Commodity Insights on the sidelines of the Gastech conference in Singapore, Takayuki Ueda said INPEX is also considering to build a new Train 3 by around 2030 at its operated Ichthys LNG project in Australia as part of expansion plans.

INPEX aims to "enter the FEED in around mid-2024, or by the end of next year at the latest" upon securing an approval from the Indonesian government on a revised plan of development for the Abadi project, said Ueda, adding that it "expects to reach the FID in about two years since the start of FEED."

"We will need to work on arranging finance, finding buyers and working on detailed design works in parallel during the FEED phase because we would not be able to make the FID without securing long-term [LNG supply] contracts and subsequent finance," Ueda said.

Asked to comment about the progress of Abadi LNG marketing, Ueda said: "While we will work on full-scale marketing with FID in parallel, we have had nonbinding [agreements], or what we call LOI with our potential customers."

"There is extremely strong interest for Abadi, especially from buyers in Indonesia, Southeast Asia on top of many including Japan and South Korea, of course," Ueda said.

"Although these are still nonbinding, we see significant volume interests."

The Abadi project is expected to produce about 9.5 million mt/year LNG and up to around 35,000 b/d of condensate. It will also supply 150 MMcf/d of natural gas by pipeline to the domestic market.

"We would need to find buyers for 9.5 million mt[/year], a level close to Ichthys," Ueda said. "However, the difference with Ichthys is probably strong interests from buyers in Asia."

"Although there are [prospective] Japanese buyers of course, most likely we would be supplying a large volume to buyers in Asia, including from Indonesia," he said, adding that the company would work on turning the nonbinding agreements to "binding contracts" during the FEED phase.

Ueda had said Aug. 9 that INPEX intends to review the Abadi project schedules after holding discussions with the new partners following a shakeup of the project.

Pertamina and Petronas signed agreements July 25 to take over Shell's 35% stake in the Masela block for around $650 million. Pertamina will own a 20% participating interest in the Masela PSC, while Petronas will own 15%.

INPEX earlier said that an FID was expected in the latter half of the 2020s with start of production in the early-2030s.

However, Tutuka Ariadji, Indonesia's deputy minister and director general of oil and gas at the ministry of energy and mineral resources, said Sept. 5 at the Gastech that the country aims to start Abadi LNG production at the end of 2029 with an eye to complete a revision of the PDP in 2023.

INPEX submitted April 4 a revised POD for the Abadi LNG Project, incorporating a carbon capture and storage component, to the Indonesian government and plans to revise the PSC to reflect incorporation of CCS following approval of the POD.

Ichthys Train 3

In addition to keeping its immediate focus on the Abadi project, Ueda said INPEX would expand capacity at its operated Ichthys LNG project in Australia as it sees the fuel helping bolster energy security in transition.

INPEX has said to boost its 8.9 million mt/year Ichthys LNG production capacity to be capable of a stable supply of 9.3 million mt/year in 2023 by debottlenecking the facility with upgraded cooling systems for liquification and taking measures against vibration.

"Looking further ahead, we are considering building new Train 3 at Ichthys by around 2030," said Ueda, adding that the company would have to find gas resources that will define the train capacity.

Ueda confirmed it was the first time he described the Ichthys expansion that involves a gradual production increase as well as a possibility of building Train 3.

"Expansion of Ichthys is about gradually expanding it, while maintaining its plateau [production]," Ueda said.

"We have confidence in maintaining the [Ichthys] plateau [production] through 2030 as well as in its expansion," he said, adding that the company would have to build the new train should it move ahead with a large-scale expansion.

To maintain Ichthys' plateau production, Ueda said INPEX will proceed with exploring blocks surrounding the Ichthys gas field offshore Western Australia, including at the Bassett Deep in the Browse Basin, together with its recently announced acquisition of a 74% stake in the AC/RL7 block in the Bonaparte Basin.

The Ichthys project involves piping gas from the offshore field in the Browse Basin in Northwestern Australia more than 890 km to the onshore 8.9 million mt/year LNG plant near Darwin. Alongside LNG, it also has capacity to produce 1.65 million mt/year of LPG and 100,000 b/d of condensate.

"In the aftermath of Russia's invasion [of Ukraine], [the industry's] focus has shifted to seek balance of energy transition and energy security from the dominance of energy transition earlier," Ueda said.

"In the area of natural gas, we see increasing LNG production from the startup of Abadi and Ichthys expansion themselves will contribute [toward] energy security."