Inpex Again Delays FID for Abadi LNG

Japanese explorer Inpex has pushed back a final investment decision (FID) for its Indonesian Abadi LNG project, joining a list of liquefaction projects which are struggling to forge ahead due to disruptions caused by the Covid-19 pandemic and increasing climate change pressures on natural gas. Inpex had planned to conduct front-end engineering and design work (Feed) in 2020 for the proposed 9.5 million ton per year project with an FID targeted in 2022. But the Covid-19 pandemic has disrupted survey work and preparatory work for Feed. An Inpex spokesperson told Energy Intelligence that the FID for Abadi is now expected to happen three to four years from now, placing the revised timeline in 2024-25. Abadi is considered critical to supplement Indonesia’s stagnant gas production and meet the country’s growing demand for gas which can displace liquid fuels and coal in power plants. The latest delay represents another setback for the project which was originally proposed as a floating LNG (FLNG) project. Following Jakarta's insistence on making it an onshore project, Inpex had to revise the development plan which was approved by the government in 2019. Jakarta also granted an extension of the Masela Block PSC by 27 years to 2055 from which the gas feedstock would be drawn (LNGI Jul.17'19). Climate Change An increasing global trend to work toward a net-zero world by 2050 has piled pressures on LNG project developers, including Qatar, Russia and the US, to look at carbon abatement solutions in order to meet buyers’ demands for sustainable fuels. Inpex has also set a 2050 goal to achieve net-zero emissions from its own operations by focusing on carbon capture, hydrogen and synthetic methane (LNGI Jan.27'21). Speaking at an earnings briefing this week, Inpex’s Managing Executive Officer Daisuke Yamada said Inpex is considering ways of mitigating emissions at Abadi LNG. "Given the growing global push toward decarbonization, we may need to consider redesigning the Abadi project with carbon capture and storage (CCS) or carbon capture, utilization and storage," Yamada said. Inpex is already studying such options for its existing 8.9 million ton/yr Ichthys LNG project at Darwin in northern Australia which has one of the highest emissions among liquefaction projects in the country. It is now evaluating potential sites for CCS in the vicinity of Darwin and expects to conduct preparation work in 2021-22. Yamada said Inpex remains committed to developing Abadi despite the delays as the firm wants to establish another growth pillar in addition to its Ichthys LNG project. Inpex owns a 65% stake in the Masela/Abadi LNG project and 35% by Royal Dutch Shell. The project is also designed to produce 35,000 barrels per day of condensate. Tough Search for Partners Another challenge facing Abadi is the disinterest of partner Shell which is looking to divest its stake (LNGI Aug.27'20). Due to the remote location of the Abadi gas field, the project was originally designed to be a floating LNG project which would have showcased the Anglo-Dutch supermajor’s FLNG technology. But the Indonesian government's insistence on building an onshore plant on the island of Yamdena has resulted in delays for the project (see map). Asian firms such as Petronas, Sinopec and PTT have been rumored to be possible contenders for the stake, but a deal does not appear to be nearing. Any further delays risk leading the Masela Block, estimated to contain 10.7 trillion cubic feet of gas resources, to become a stranded asset. Lower Production Inpex's First-Half Results Ending Jun 30, 2021 (billion yen) H1'21 H1'20 %Chg. Net Sales 498.4 391.7 27.2% Operating Income 222.7 123.8 79.9 Net Income 52.0 -121 NA Net Oil and Gas Production ('000 boe/d) 527.9 581.6 -9.2% $1 = 110.65 yen. Source: Inpex Inpex reported a 9.2% decline in its net oil and gas output which averaged 527,900 barrels of oil equivalent per day in the first six months. The spokesperson said this was due to maintenance at Ichthys and reduced production at its oil fields in Abu Dhabi which was affected by production cutbacks agreed upon by Opec-plus. Energy Intelligence understands that LNG exports by Ichthys have been lower than expectations due to upstream issues which affected gas supply to the liquefaction plant since last December (LNGI Dec.4'20). Clara Tan, Singapore