Shell Pulls Out from LNG Project in Indonesia’s Masela Block

JAKARTA, KOMPAS.com – Royal Dutch Shell Plc (Shell) is withdrawing from Indonesia’s Abadi liquefied natural gas (LNG) project in Masela Block and Japanese oil company Inpex Corporation (Inpex), which has the biggest participating right in the project, is currently looking for new partners, an official confirmed on Sunday, July 5.

“Yes, correct [Shell is leaving]. Inpex is currently looking for new partners,” Kontan.co.id quoted Upstream Oil and Gas Special Regulatory Taskforce (SKK Migas) Deputy of Operations Julius Wiratno as saying.

Julius explained that Shell’s withdrawal was due to the Covid-19 pandemic that has impacted the company’s cash flow. Shell decided to focus on other projects taking place in Indonesia.

Shell has 35 percent and Inpex has 65 percent participating right in the Masela Block, respectively. Meanwhile, the regional government will certainly receive a 10 percent participating right in the block. Masela Block is located in the Arafura Sea, about 800 kilometers east of Kupang in East Nusa Tenggara Province.

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“Some of Shell’s projects in other countries are not going well so the company’s cash flow is affected. They mainly focus on the ongoing projects now,” he said.

Previously, the head of SKK Migas Dwi Soetjipto said that bleak market outlook for the LNG business has caused some oil and gas companies to be concerned about project implementation, including in the Masela Block.

“Currently, the oil and gas industry is facing serious problems [including] the LNG price. Project owners such as in the Masela project are in fear of the work implementation,” said Dwi a few days ago.

Julius said the project may need more time. But he assured that Inpex was committed to completing the project on time. The Masela Block is to go on stream in 2027.

Talk about Shell’s withdrawal from the project with a total investment of $20 billion began to circulate in the middle of 2019. However, both parties decided to continue to collaborate on the Masela Project.

The Masela Project has to deal with some work such as land acquisition and finding buyers. Inpex Corporation and Shell Indonesia as the operator have not yet found potential buyers for the LNG product.

Previously, Inpex Masela Ltd signed memoranda of understanding (MoUs) on gas supply from Abadi LNG Project with Indonesian state-owned electricity company PT PLN and state-owned fertilizer producer PT Pupuk Indonesia in February 2020.

The MoU aimed to discuss sales and purchase agreements for the LNG and natural gas supply from the project to natural gas-fired power plants operated by PLN and natural gas 150 million cubic feet per day (mmscfd) to a co-production plant, which Pupuk Indonesia plans to construct. SKK Migas aims to complete the process of finding buyers in 2021.

(Editor : Erlangga Djumena)

Source: https://money.kompas.com/read/2020/07/06/060900926/shell-hengkang-dari-blok-masela-apa-alasannya-?page=2