Japanese oil company Inpex has submitted a revised development plan for Abadi LNG project in Indonesia, incorporating a carbon capture and storage (CCS) component, on behalf of the INPEX-Shell joint venture.
Inpex has amended the plan of development to include plans to neutralize all carbon dioxide (CO2) emitted from natural gas production at the Abadi offshore gas field through the introduction of CCS.
In March 2023, Indonesia enacted a Ministerial Regulation of Energy and Mineral Resources on Carbon Capture, Utilization and Storage (CCS/CCUS) in the oil and gas business.
Accordingly, Inpex said Tuesday, the project is expected to be the first CCS project to be carried out as a cost recovery business based on the production sharing contract framework governing upstream oil and gas projects in Indonesia.
Cost recovery in production sharing contracts (PSCs) PSCs generally stipulate that an oil and natural gas development company carries out exploration and development work at its own cost as a contractor of the government of an oil-producing country, and is entitled to the recovery of the exploration and development cost in the production stage through a portion of the produced hydrocarbons.
The remaining portions are then shared between the oil-producing country and the contractor under a predetermined allocation ratio. In Indonesia government approval is required when determining the extent of allowable cost recovery, where a greater extent leads to improved cash flow and project economics for the contractor.
"Going forward, INPEX expects to sequentially resume activities associated with the project, including various on-site activities, and prepare to begin FEED work subject to the authorities’ approval of the revised POD and taking into account other circumstances concerning the project’s development status," Inpex said.
Afterward, Inpex expects to complete the necessary preparations, including marketing and financing activities, and proceed with the project aiming to reach a final investment decision (FID) in the latter half of the 2020s and start production in the early 2030s.
The Project is expected to be INPEX’s second self-operated, large-scale natural gas development project following the Ichthys LNG Project in Australia.
The Abadi LNG project’s yearly LNG output volume is expected to reach 9.5 million tons, equivalent to more than 10 percent of Japan's annual LNG imports.
Inpex said that the Abadi offshore gas field is expected to contribute to improving energy security in Indonesia, Japan, and other Asian countries, based on its "world-leading gas field properties and plentiful reserves enabling efficient development and its CCS component allowing the stable supply of clean energy over the long term."
In addition, Inpex said, the project is expected to contribute significantly to the much-needed economic development of the eastern part of Indonesia in particular, and to achieving Indonesia’s goal of reaching net zero CO2 emissions by 2060.
The Abadi gas field is located in the Masela Block, Arafura Sea, and is being developed by INPEX (65%, operator) with partner Shell (35%). Reports have emerged in recent months that Shell is looking to divest its stake. Reuters has also reported that Malaysia's Petronas and Indonesia's Pertamina could take over Shell's stake in the project.
The Abadi LNG project is based on an onshore LNG development concept. Inpex had previously planned to develop the project using a Floating LNG unit. However, Indonesian authorities in 2016 rejected the FLNG plan, calling for the project to be developed onshore, saying that an onshore plant would benefit its economy more.
The offshore contract area covers around 2,503 square kilometers, with the water depth at the site being 400 to 800 meters deep.
The offshore block is located 150 kilometers offshore Saumlaki in Maluku Province. The project is expected to produce 9.5 million tons of LNG per year.
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