Rivals in frame for FPSO engineering contest on $19 billion Asian gas project

Two international contracting groups are in the frame to secure parallel front-end engineering and design contracts for the floating production, storage and offloading (FPSO) vessel for Inpex's $19 billion Abadi gas mega-project in Indonesia.

The Abadi field on the Masela production sharing contract in the Arafura Sea contains recoverable reserves in excess of 10 trillion cubic feet of gas.

The development concept involves a large FPSO vessel; an array of subsea production equipment in water depths between 400 and 800 metres; a 180-kilometre offshore gas export pipeline and a two-train onshore liquefaction plant with nameplate capacity of 9.5 million tonnes per annum of liquefied natural gas (LNG).

Indonesia's Minister of Energy and Mineral Resources, Bahlil Lahadalia, last week said he had issued a warning letter to Japanese operator Inpex threatening to revoke the PSC if development of Abadi — which was discovered back in 2000 — did not now proceed at pace, reported Indonesia Business Post.

Two groups are in the fray for the FPSO FEED competition, with the awards likely to be finalised by the second quarter of this year, multiple sources told Upstream.

A grouping of McDermott International of the US and Italy’s Saipem is competing with another consortium comprising French company Technip Energies and Japan’s JGC, with both pairings expected to be awarded parallel FEED contracts, sources told Upstream.

The FPSO will have gas processing capacity of up to 1.8 billion cubic feet per day of gas and be able to handle condensate production of 35,000 barrels per day.

It will be a large newbuild vessel, which will be owned and operated by the Abadi partners — currently operator Inpex with 65%, Indonesia's national energy company Pertamina on 20% and its Malaysian counterpart Petronas having 15%.

Sources said the Abadi floater calls for a high level of local content (TKDN). Both McDermott and Saipem have Indonesian subsidiaries with their respective yards at Batam and Karimun.

An Inpex spokesperson told Upstream: "As for the Abadi FID (final investment decision) schedule, we expect to begin FEED in the middle of this year, provided government approvals and contractor bid preparations proceed as expected.

"We have also said that FEED typically takes two years to accomplish, so that would put FID in around 2027. We will aim to start production at the beginning of the 2030s."

McDermott, Technip Energies, Saipem and JGC have yet to respond to queries sent by Upstream on the Abadi FPSO FEED competition.

All the key FEED contracts for Abadi are likely to be awarded by the second quarter of this year, sources said.

For the subsea FEED package, which includes the pipeline, two competing groups — Worley, and a consortium of Wood and Synergy — are believed to be competing.

Supply chain concerns

At an Investor Day last year, Inpex chief executive, Takayuki Ueda, said the LNG contractor market for the Abadi project is "an area where we are currently facing significant challenges".

The market for engineering and EPC companies had become extremely tight, Inpex said, and there were numerous competing projects happening globally, which meant that contractors were already busy.

Inpex said it is trying to make the Abadi LNG project as attractive as possible for the contractors.

“In Indonesia, traditionally, EPC projects have been contracted on a lump-sum basis, where contractors take on the full risk. However, with that kind of approach, it’s hard to find contractors willing to say that they would like to take on the Abadi project,” Akihiro Watanabe, now a managing executive officer, and senior vice president of Asia projects at Inpex, earlier said.

It is also important to establish a fair share of risks among Inpex, the contractors and the Indonesian government, according to Abadi's operator.

Watanabe earlier said Inpex is considering contractual payment methods and frameworks “that haven’t been widely used in Indonesia before to attract more EPC contractors and ensure competitive bidding”.

Abadi project dynamics

The Abadi field’s peak production is touted as 9.5 million tpa of LNG, 150 million cubic feet per day of pipeline gas for local customers and some 35,000 bpd of condensate.

Head of SKK Migas’ formality division, George Simanjuntak, late last year said Abadi would be one of the backbones to achieving the Indonesian government’s domestic production target of 1 million bpd of oil/condensate and 12 Bcfd of gas.

The Indonesian authorities in late 2023 approved the second revision of the Abadi Plan of Development, which now incorporates a carbon capture and storage (CCS) scheme that alone comes with a price tag of $1 billion-plus, sources earlier said.

Floating LNG was the original preferred development concept to exploit the remote giant offshore gas field. Initial plans for a relatively small FLNG facility as part of a phased project were subsequently superseded by a proposed 7.5 million tpa FLNG vessel-centred development.

UK supermajor Shell in 2011 acquired a 35% interest in the Masela PSC when FLNG was the development concept of choice. The Indonesian regulator approved Inpex's PoD for a 7.5 million FLNG facility to exploit Abadi. However, then-President Joko Widodo, popularly known as Jokowi, subsequently — and controversially — vetoed the FLNG project in favour of onshore liquefaction, which he said would provide more jobs for locals and enable pipeline gas volumes for the domestic market.

Following the presidential veto, Shell in October 2023 bowed out of Abadi, completing the divestment of its stake between Petronas and Pertamina.