Indonesia’s Medco Energi (IDX:MEDC) is open to the possibility of joining the Indonesian government consortium that is considering acquiring Shell’s (LON:SHEL) 35% share in the Abadi liquefied natural gas (LNG) project in the Masela Block offshore Indonesia that is led by Japan’s Inpex (TYO:1605).
“If it’s economically viable, then yes, we are definitely interested. But not as an operator, only a minority shareholder, for the learning process,” Medco Energi president director Hilmi Panigoro told Kontan.co.id on Sunday.
However, he noted that the project would need at least two things. First, competent operators for developing deepwater oil and gas. As far as Hilmi is concerned, only a few major international oil companies are qualified, such as Shell, ExxonMobil, Chevron, BP, and ENI. Second, a large and robust balance sheet to bear a huge capital expenditure is also needed. “So, one of the consortium members to develop the Masela Block must have the two criteria above,” Hilmi said. Moreover, to attract investors to such a massive project, the sanctity of the contract is also needed.
Medco is looking for more merger and acquisition (M&A) opportunities in Southeast Asia, particularly in Indonesia, Malaysia, and Brunei, after successfully acquiring ConocoPhillips Indonesia business in a US$1.35 billion deal last year. However, Medco prefers natural gas assets over oil assets.
The Indonesian government is directing national oil company Pertamina to buy Shell’s 35% equity in the proposed Abadi liquefied natural gas (LNG) project in the Masela Block offshore Indonesia that is led by Japan’s Inpex.
The Masela development has long struggled to gain traction. Moreover, Shell’s divestment process has so far been unsuccessful, adding further uncertainty for the stalled project, which holds 360 billion cubic metres (cm) of gas in the Abadi field.
As a result, Indonesia’s President Joko Widodo, has instructed his government to explore options for state-owned enterprises, notably Pertamina, to buy Shell’s share of the project.