Update: Indonesia chooses onshore option instead of Abadi FLNG

(Updated with a statement by Inpex on Thursday, 24.3.)

Inpex-owned multi-billion Abadi FLNG project has suffered a huge blow after Indonesia on Wednesday decided to move the project onshore. 

The decision to move the giant LNG project proposed by Inpex and Shell from offshore to onshore was announced by Indonesia’s President Joko Widodo.

“This is a long-term project that concerns hundreds of trillions of rupiah. From these calculations, we have decided to build it onshore,” President Joko Widodo said in a statement, Reuters reports.

“Our considerations are first we want the regional economy as well as the national economy to benefit from the development of the Masela block,” he said.

Inpex currently has a 65 percent operating interest in the Masela block where the Abadi gas field is located, while Shell holds the remaining 35 percent.

A Shell spokeswoman told LNG World News in an emailed statement on Wednesday that the company is “unable to comment now as Shell is waiting to receive a formal letter from the Government of Indonesia”.

“We look forward to better understanding and discussing the implications of the decision with the relevant Government agencies,” she said.

Inpex said in a statement on Thursday that the company is currently in “the process of confirming the facts, and will give due consideration to the implementation of the Abadi LNG project upon receiving official notification on the subject from Indonesian authorities“.

The Indonesian energy regulator SKK Migas said last week that Inpex will delay the development of the LNG project by at least two years, as Indonesia was still considering whether the LNG project should go ahead as an offshore facility or be moved onshore.

Inpex notified the regulator that it plans to downsize its workforce in Indonesia of around 400 by at least 40 percent. Shell engineers working on the giant LNG project had also been told to look for other work within the company.

The Japanese company submitted to SKK Migas in November last year a revised plan of development of the Abadi LNG project, as a result of a greater volume of natural gas reserves being confirmed.

The revised plan envisioned the adoption of a floating LNG plant with an annual processing capacity of 7.5 million tons, bigger then Shell’s Prelude FLNG.

It was recently reported that $6 billion could be saved by Inpex and Shell if Indonesia opts to build the Masela Abadi LNG facility on land instead of offshore.

Maritime affairs coordinating ministry official Haposan Napitupulu said that a land-based LNG facility would cost around $16 billion.

Contrary to the Maritime affairs ministry, SKK Migas said a floating LNG facility would cost around $14.8 billion, $4.5 billion less than an onshore facility.

LNG World News Staff