Inpex agrees on framework for $20-billion Indonesian LNG project

TOKYO and SINGAPORE (Bloomberg) -- Japan’s Inpex Corp. agreed on a framework with Indonesia for the $20-billion Abadi liquefied natural gas project, a key step toward reaching final investment for one of the world’s biggest export ventures.

The heads of agreement includes an extension of the company’s contract to operate the Masela field by 27 years until 2055, Inpex President Takayuki Ueda told reporters at a G-20 energy and environment meeting in Japan. The company will submit a development plan to Indonesia within weeks and once approved will start the front-end engineering and design work before making a final investment decision in two to three years.

“This is a massive LNG project,” Ueda said Sunday in the mountain resort town of Karuizawa. The venture, which will produce about 9.5 million tons of LNG a year once it’s fully operational, is “extremely significant” for Inpex and Indonesia, because the nation doesn’t have any other large natural gas fields, he added.

The agreement is a small step forward for the project, which Inpex had to redesign as an onshore plant after the Indonesian government rejected its proposal for a floating-LNG facility. Developing the natural gas field in the Masela block and the accompanying Abadi LNG export project will cost about $20 billion, according to Indonesia’s energy and mineral resources ministry.

Inpex signed an agreement with the Indonesian government in 1998 to develop the offshore Masela block in Abadi gas field. The Japanese company has a 65% stake and Royal Dutch Shell Plc the rest.