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Revised plan for US$20 billion Indonesian maritime gas field

An LNG tanker gets underway. Photo: Shutterstock.

Japanese company Inpex (TSE: 16050) has today announced that it has filed a revised plan of development for the US$18-$20 billion Abadi Liquefied Natural Gas Project.

The revised plan is for a land-based development scheme and an annual production capacity of 9.5 million metric tons of LNG and up to 35,000 barrels of condensate each day. A metric ton is equivalent to 2,204.6 U.S. pounds. Inpex, together with oil major Shell, have also filed an application to extend the duration of the production sharing contract by at least 20 years.

Green light given

The filing flows on from last week’s heads of agreement signing in which Inpex and the Indonesian government agreed to start work on the Abadi LNG project.

The project is majority owned and operated by Inpex, which has 65 percent ownership; Shell Upstream Overseas Services owns the remaining 35 percent, according to the Indonesian Ministry of Energy and Mineral Resources.

The project was described by Indonesia’s Minister of Energy and Mineral Resources, Ignasius Jonan, as being the biggest Japanese investment in Indonesia in the last five decades.

Indonesia’s Head of the Executive Task Force for Upstream Oil and Gas Business Activities, Dwi Soetjipto, commented that “large foreign investment is expected, and it can provide a positive influence on foreign direct investment in Indonesia, the creation of a multiplier effect for domestic supporting and derivative industries.”

The agreement between Inpex and Indonesia is said by Inpex to acknowledge that the plan of development for the gas field is economically competitive.

Location and history

The Abadi Field is located in 400 to 800 meters (1312 to 2625 feet) of water. The field is also located at the maritime border between Indonesia and Australia, about 200 miles north of the Australian city of Darwin and 1,646 miles to the southeast of the Indonesian capital of Jakarta.

Inpex bought its interest in the Masela Block in November 1998 and subsequently discovered the Abadi Gas Field during exploratory drilling in 2000. A series of further appraisals and exploratory drilling took place. In 2010, Indonesia approved Inpex’s plan to deploy a floating LNG plant with an annual processing capacity of 2.5 million tons a year.

However, further drilling by the company revealed that there was considerably greater reserves than originally believed. Inpex subsequently decided, in 2015, to develop a large-scale floating LNG plant with 7.5 million tons per year capacity. However, the authorities preferred an onshore facility. Discussions have been ongoing since then and last week’s signing has been welcomed by the company and Indonesia.

Meanwhile, over the border in Australia…

In other Inpex-LNG news, the company revealed earlier this month that it had sailed the first shipment of LNG from the Prelude Floating Natural Gas facility, which is located 475 kilometers northeast of the town of Broome, in Western Australia.

Prelude, which is 17.5 percent owned by Inpex (operator Shell is the majority owner with 67.5 percent), has an LNG production capacity of 3.6 million tons per annum.

Andrew McConville, the CEO of Australian gas industry association APPEA, congratulated the developers of the project.

“Industry welcomes and applauds the first LNG shipment from Prelude that will be delivered to customers in Asia. This historic and world-class FLNG project will deliver jobs, taxation and export revenues for Australia for decades to come,” Mr McConville said.

More than A$350 billion of investment has been made in the Australian LNG industry and APPEA forecasts more than 85 million tons of exports by 2020. Seven new LNG projects have now been completed since 2015.

Trade in international LNG is growing

There were 316.5 million metric tons of global LNG traded last year, according to the International Gas Union. A metric ton is equivalent to 2,204.6 U.S. pounds. The global LNG trade is expanding as there was an increase of 28.2 million tons from the 2017 figures, equating to 9.8 percent year on year growth.

Trade growth was driven by increasing numbers of liquefaction plants coming online. The International Gas Union reports that Asia is the key driver of LNG growth, with demand strong in China, South Korea, India and Pakistan.

China and South Korea together had demand growth of 22.2 million tons, which represented nearly 80 percent of the increase between 2017 and 2018. At the end of 2018, there were 525 LNG shipping vessels, which includes both floating storage re-gasification units and standard LNG-carrying ships.