Following approval from Indonesian authorities of Inpex’s revised plan for Abadi LNG project, Inpex and its partner Shell are set to start preparations for Front End Engineering Design (FEED) work for the project.
Inpex and Shell will develop Abadi via an offshore production facility and a 9.5 million tonnes per annum (mmpta) onshore LNG plant, at an estimated cost of $20 billion.
As previously reported, Inpex received approval from Indonesian authorities for the revised Plan of Development (POD) for the Abadi LNG project, which is located in the Arafura Sea, offshore Indonesia.
However, according to Wood Mackenzie, the development still faces several challenges, including a crowded EPC market, finding buyers for the LNG, and technical challenges.
In a statement on Tuesday, Inpex confirmed that the plan had been approved. In addition to the revised POD, the authorities also approved the application for a seven-year additional time allocation and a 20-year extension to the Production Sharing Contract (PSC) for the Masela Block, extending the term of the PSC until 2055.
Takayuki Ueda, President & CEO of Inpex, commented: “While the project’s development concept has been changed from a floating LNG scheme to an onshore LNG scheme, I am confident that the economics of the Project based on the revised POD are now sufficiently strong for Inpex and Shell given the PSC term until 2055 and sufficient financial conditions have been secured following a series of constructive discussions with the authorities.
“Inpex aims to make this project competitive and will continue to work toward the production startup scheduled in the latter half of the 2020s.”
Moving forward, Inpex said that, together with its partner Shell, the company would begin the necessary preparations to start FEED work. Preparations will mainly consist of the mobilization of operational personnel and bidding-related work for the selection of contractors undertaking FEED work.
A final investment decision (FID) is subject to a series of subsequent evaluations, including FEED work. Inpex is expected to make the FID within three years and first gas is expected in 2028.
Commenting on the POD Approval, Clare Harris, Shell’s Executive Vice President Venture Development said, “Obtaining approval for the Plan of Development is an important achievement and Shell appreciates the constructive partnership of the authorities that has enabled progress on this major milestone.”
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