Japan’s Inpex (TYO:1605) has confirmed that it will not take a final investment decision (FID) for its proposed Abadi liquefied natural gas (LNG) development in the Masela Block offshore Indonesia until the second half of the 2020s with the aim of starting production in the early 2030s. However, questions remain around the commercial viability of the project and this also marks the latest in a series of delays for Abadi.
Inpex said last August that it did not plan to take FID until around 2024-2025, two years later than previous guidance of 2022-2023.
Last week, Inpex said it will carry out a comprehensive study of measures to introduce carbon capture utilisation and storage (CCUS) to “make the project cleaner and further reduce costs, and promote the project as competitive and clean.”
According to Inpex’s Vision@2022, released last week, the company will continue negotiations with the Indonesian government about the revised plan of development, for Abadi LNG, that will include CCUS with the goal of getting official approvals in 2023.
The Abadi field is carbon dioxide (CO2) heavy. Adding carbon capture and storage (CCS) or CCUS will likely make the project even less commercially appealing than it already it. But the growing push towards decarbonisation, especially among Japanese companies, makes development of Abadi almost impossible without CCS.
Still, as Energy Voice previously reported, there are serious doubts about the commercial viability of Inpex’s proposed Abadi LNG. The proposed project, which has long struggled to gain traction, is looking increasingly unlikely to be developed, especially as another wave of US LNG projects looms large.
Numerous LNG export projects are under development or proposed in the US and they are extremely competitive given their low-cost and flexible shale gas supplies. Moreover, China the world’s biggest market for imported LNG, is expected to sign up for further US LNG deals, potentially triggering a third wave of LNG development. Japan’s JERA is also racing to secure new supplies from the US, underpinning new investment.
This new wave of LNG investment does not bode well for projects, such as the proposed 9.5 million tonnes per year (t/y) Abadi scheme, that already face numerous hurdles to commercialisation.
Project partner Shell (LSE:RDSA) is attempting to divest its stake in the Abadi LNG project, but this will be further delayed as operator Inpex seeks approval for a revised plan of development (POD).
In its Vision@2022, Inpex also that it is seeking M&A, as well as CCS opportunities, in Vietnam, Malaysia, as well as other countries in Southeast Asia.
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