Japanese operator Inpex has signed a memorandum of understanding with Indonesia’s state-owned gas transmission company Perusahaan Gas Negara (PGN) to sell gas from its grassroots Abadi project on the remote Masela production sharing contract.

Volumes and scheduling of gas supplies have yet to be discussed ahead of a concrete agreement.

The memorandum, which was signed by Inpex official Akihiro Watanabe and PGN director Syahrial Mukhtar on the sidelines of last week’s 2020 International Convention on Indonesian Upstream Oil and Gas, was witnessed by upstream regulator SKK Migas head Dwi Soetjipto.

"This signing will be an important milestone for both parties," Syahrial told the conference of Thursday’s signing.

“This is a joint effort to increase the competitiveness of the national [oil and gas] industry to build a sustainable Indonesian economy," added Dwi.

Although just a preliminary agreement towards a firm sales deal, it is another step in the right direction for the giant gas field development, already designated a project of national strategic interest, that is targeting start-up in the late 2020s.

Inpex in tandem is formalising bidders for the two remaining front-end engineering and design contracts for Abadi - the floating production, storage and offloading vessel and the onshore liquefied natural gas plant.

The FPSO is envisaged with capacity to handle 1.8 billion cubic feet per day of gas and to process up to 36,000 barrels per day of condensate.

The Indonesian authorities last year approved the revised Plan of Development for Abadi with envisaged output of 9.5 million tonnes per annum of LNG, 150 million cubic feet per day of pipeline gas and some 35,000 bpd of condensate.

Inpex in February 2020 signed an MoU to supply gas to Indonesia’s state-owned electricity company Perusahaan Listrik Negara and local fertiliser manufacturer Pupuk Indonesia. This agreement covers long-term domestic LNG and pipeline natural gas supply from the Abadi mega-project.

The development reportedly has proven reserves of up to 18.5 trillion cubic feet of gas and 225 million barrels of condensate.

Current partners in the Masela PSC are operator Inpex with 65% and Shell on 35% although the Anglo-Dutch supermajor has put its stake up for sale.

Dwi earlier said that Shell’s divestment should be completed in 2021, while adding that the Abadi partner was committed to continuing and funding the work programme up until its departure.

Upwards of 30 companies have already accessed the open data in Shell’s Masela data room.

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Indonesia has set a target of increasing domestic gas production to 12 Bcfd by 2030.