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Indonesia approves Abadi LNG
INDONESIA
THE Indonesian Ministry of Energy and Min- eral Resources approved the revised plan for the Abadi LNG plant, on July 12. e minister, Ignasius Jonan, signed o on the new develop- ment following discussions about the cost recov- ery. e next step is a nal investment decision (FID).
The Abadi LNG plan involves a proposed 9.5mn tonne per year (tpy) plant, costing an esti- mated $18.5-19.8bn. Japan’s Inpex is the operator with a 65% stake, while Royal Dutch Shell has the remaining 35%. In addition to the LNG produc- tion, the project will also produce 35,000 barrels per day (bpd) of condensate.
Wood Mackenzie’s research director, Andrew Harwood, said the revised plan included amend- ments to the Masela production-sharing con- tract (PSC). is includes a 20-year extension and improved scal terms. e Japanese com- pany intends to reach FID within three years and produce rst gas in 2028.
“Post Jokowi’s election win, the government has shown greater exibility on scal terms. In addition to the PSC extension, the government has agreed to an enhanced contractor pro t split, investment credit and indirect tax exemptions which will provide for a post-tax contractor pro t share of 50%,” Harwood said.
A er approving the Abadi LNG plan, Jonan visited Indonesian President Joko Widodo to explain the project. e minister said construc- tion would create as many as 30,000 jobs. A state- ment noted the PSC would now run until 2055.
An SKK Migas’ executive, Dwi Sucipto, noted that while negotiations had been tough they had nally been concluded. “ is is very meaningful forIndonesia,”theo cialsaid.SKKexpectspro- duction to begin in 2027 for the project, which will tap resources from the Arafura Sea.
Inpex’s president and CEO, Takayuki Ueda, noted the change of plan from a oating LNG (FLNG) plant to the onshore.
Harwood noted the importance of domestic LNG demand, which Wood Mackenzie has pre- dicted will rise to 13mn tpy by 2030.
While the project is “crucial” for Inpex’s next step, it forms a more minor part of Shell’s portfo- lio. “Despite rumours surfacing in May that the major was seeking to exit, we think a divestment unlikely until the project gets closer to invest- ment sanction,” he said.
There are challenges ahead for the pro- ject, Harwood said. “Firstly, the partners are likely to face a crowded EPC market due to the record number of LNG projects vying for sanc- tion over the same period. Secondly, Inpex will have to line up buyers for 9.5mn tpy of LNG as competing sources of supply enter the market. Finally, the operator must navigate technical challenges. ese range from the remoteness of the onshore facility to laying 150 km of pipeline.”
Inpex submitted the revised plan of devel- opment on June 20. is followed a revised pre-front-end engineering and design (pre- FEED) study.™
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