The cost to add carbon capture and storage (CCS) to the proposed Abadi liquefied natural gas (LNG) project in the Masela Block offshore Indonesia that is owned by Japan’s Inpex (TYO:1605) and Shell (LON:SHEL) is expected to cost over $1 billion.
Indonesian upstream regulator SKK Migas said the investment required for the proposed project will increase significantly after seeing the results of studies for the implementation of carbon capture utilisation and storage (CCUS). Development of Abadi’s proposed 9.5 million tonne per year (mtpy) onshore liquefaction scheme will be technically challenging and was previously expected to cost around $18 billion to $20 billion before the idea of CCUS was considered necessary.
Dwi Soetjipto, head of SKK Migas, said that the additional costs for the development of CCUS at the project are expected to exceed $1 billion, local media reported today. “They (Inpex) have finished this (CCUS) study, it is estimated that it (adding CCUS) could reach $1.2 billion to $1.3 billion,” said Dwi during a meeting at the Ministry of Energy and Mineral Resources on Monday.
As a result, Dwi said the government is open to discussing additional incentives with Inpex, which operates the project, to improve the commerciality of the proposed development.
Inpex has a 65% share of the Masela Block with partner Shell holding the remaining 35% equity. Shell is seeking to divest its stake. But getting a new plan of development – that incorporates CCS – approved by the government will be key before any buyer steps up. Improved commercial terms would also help improve the chances of a successful divestment.
Moreover, the project will struggle to move forward until Shell divests its stake. But Indonesian President Joko Widodo, known locally as Jokowi, is desperate for the development to proceed. Reports suggest that he has lobbied Japanese Prime Minister Fumio Kishida to help get the Masela gas project moving forward. Japan has reportedly agreed to provide a loan to enable Indonesian state-backed companies, such as Pertamina, to buy out Shell.
As reported previously by Energy Voice, the value of Shell’s stake is estimated at between $800 million and $1 billion. Jokowi has instructed national oil company Pertamina to explore the possibility of buying Shell out. Indonesia’s investment minister and investment coordinating agency chief Bahlil Lahadalia said apart from Pertamina, the state-owned wealth fund Indonesia Investment Authority (INA) was also another potential buyer of the stakes.
The project includes a large FPSO unit capable of handling 51 million cm per day of gas and up to 36,000 barrels per day of condensate, as well as a deep-water trunk pipeline from the Abadi field to proposed liquefaction facilities on Yamdena in the remote Tanimbar Islands
Inpex recently reiterated that it is targeting start-up of the stalled Abadi LNG project in the Masela Block offshore Indonesia in the early 2030s.
During its 1H results, Inpex said it is continuing “negotiations with the Indonesian government and concerned parties for the re-revision of the plan of development, aiming to reach FID in the second half of the 2020s.”