Green light for Indonesia’s Abadi LNG project

The Indonesian government is understood to have approved a revised plan of development for the Abadi LNG project. Japan’s Inpex (operator, 65%) and Shell (35%) propose to develop Abadi via an offshore production facility and a 9.5mn t/y onshore LNG plant, at an estimated cost of $20bn.

According to Wood Mackenzie Research Director Andrew Harwood, the revised plan of development ‘details amendments to the Masela production sharing contract (PSC) to improve the commercial viability of the project, including a 20-year extension, a further seven years to compensate previous delays, and enhanced fiscal terms’.

Inpex aims to make a final investment decision (FID) within three years. First gas is expected in 2028.

Harwood continues: ‘Post Jokowi's election win, the government has shown greater flexibility on fiscal terms. In addition to the PSC extension, the government has agreed to an enhanced contractor profit split, investment credit and indirect tax exemptions which will provide for a post-tax contractor profit share of 50%.’

‘For Indonesia, making progress on Abadi is critical. Domestic LNG demand is expected to rise to 13mn t/y by 2030 as gas demand grows and production declines. Abadi is also crucial to the next phase of growth for Inpex, post-Ichthys. At peak, we estimate Abadi to contribute 180,000 boe/d (based on working interest) towards Inpex’s ambitious long-term production target of 1mn boe/d.’

In contrast, Abadi looks more modest in Shell’s industry-leading LNG portfolio. Despite rumours surfacing in May that the major was seeking to exit, Harwood thinks a divestment ‘is unlikely until the project gets closer to investment sanction’.

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