JAKARTA (RambuEnergy) – INPEX Corporation (INPEX) announced that it is set to commence Pre-FEED work for the Abadi onshore LNG Project in the Masela Block, located in the Arafura Sea in Indonesia.
The pre-FEED is an important milestone in the development of the Abadi LNG Project, which is operated by the company’s subsidiary INPEX Masela, Ltd.
INPEX said it will formulate a detailed revised plan of development (POD) contingent on the results of the Pre-FEED work and ongoing discussions with the Indonesian authorities to achieve a cost-efficient and economically competitive project.
Following government approval of the revised POD, a series of subsequent evaluations including front-end engineering and design (FEED) work will be carried out leading to a final investment decision (FID).
In September 2015 INPEX submitted a revised POD envisioning a larger 7.5 million tons per annum LNG processing capacity of a Floating LNG (FLNG) to the Indonesian government authorities. In April 2016, the authorities responded by instructing the company to re-propose the POD for the Abadi LNG Project based on an onshore LNG development scheme.
Following constructive discussions with the authorities that included agreeing to the need for an economically viable project, INPEX is now set to commence Pre-FEED work based on an onshore LNG development scheme with an annual LNG production capacity of 9.5 million tons.
The impact of this matter on the company’s consolidated financial results is minimal, it said.
Masela Block is estimated to have 18.47 trillion cubic feet of proved and probable gas reserves. The Abadi field project is one of the largest gas projects being developed in Indonesia. Inpex, along with its partner Shell, is expected to spend over US$5 billion to develop the field.
Initially, Inpex targeted to commence production of the Abadi field in 2018. However, it was then delayed to 2019 and now it is further delayed to 2022, after the Joko Widodo government instructed Inpex to build onshore LNG plants, instead of offshore Floating LNG (FLNG).
Under the existing regulation, a Production Sharing Contract (PSC) holder is only allowed to submit extension request 10 years before the contract expires, meaning that Inpex is only allowed to seek for extension in 2019.
Given huge amount of investment, the limited production phase has encouraged Inpex to secure early government guarantee to extend the contract beyond 2028. (*)