$650 million deal: Shell selling giant gas asset to Pertamina and Petronas - Upstream Online

$650 million deal: Shell sells giant gas asset to Pertamina and Petronas | Upstream Online

UK supermajor Shell has agreed to sell for up to $650 million its sole partner stake in Inpex’s Masela production sharing contract offshore Indonesia, which hosts the giant Abadi gas field, to the nation’s state-owned Pertamina and Malaysian counterpart Petronas.

The Indonesian authorities are currently reviewing Japanese operator Inpex’s plans to exploit Abadi as a 9.5 million tonnes per annum onshore liquefied natural gas project, that would include a carbon capture and storage scheme.

Shell on Tuesday confirmed its subsidiary Shell Upstream Overseas Services (SUOS) had agreed to sell for a base consideration of $325 million cash its 35% participating interest in the Masela PSC. The transaction, which has an effective date of 1 January 2023, carries an additional contingent amount of $325 million to be paid when the final investment decision is taken on the Abadi gas project.

Petronas revealed that is acquiring a 15% interest in the Masela PSC located in the deep waters of west Arafura Sea, in eastern Indonesia while Pertamina Hulu Energi (PHE) is taking up a 20% stake.

"The acquisition is a result of a joint bidding collaboration between Petronas Masela and its partner, PHE, where both entities will acquire Shell’s entire 35% participating interest in the Masela PSC," Petronas said after both newcomers had signed their respective sale and purchase agreement (SPA) with Shell.

“This acquisition marks a significant milestone in Petronas’ portfolio expansion in Indonesia," said the company's chief executive Tengku Muhammad Taufik.

"Petronas is excited to participate in the Masela block, which is one of the country’s key strategic projects. Our participation underscores the commitment in supporting Indonesia’s production target to achieve 1 million barrels of oil per day and 12 billion standard cubic feet per day of gas by 2030."

Taufik said that the project also provides an opportunity for Petronas to contribute its technical expertise in the development and monetisation of the block, and will further strengthen the company's global LNG portfolio towards meeting growing demand for lower-carbon energy from Indonesia and across the region.

"We look forward to working closely with our partners PHE, Inpex and SKK Migas towards unlocking the full potential of this asset, while maintaining our strong focus on environmental stewardship and the enrichment of local communities,” he added.

The deal is targeted for completion before end-September, subject to completion of conditions including regulatory approval from Indonesia’s Ministry of Energy & Mineral Resources.

“The decision to sell our participation in the Masela PSC is in line with our focus on disciplined capital allocation,” said Zoe Yujnovich, Shell’s integrated gas and upstream director.

“We wish to thank all stakeholders, especially the Government of Indonesia for their support throughout the sales process. Shell remains active in Indonesia and continues to contribute to the country’s energy transition journey.”

Inpex holds the remaining 65% operated interest in the Abadi asset, which has more than 10 trillion cubic feet of recoverable gas reserves, on the Masela Block that is located 150 kilometres offshore Saumlaki in Maluku province.

SUOS in 2011 acquired its interest into the Masela PSC at a time when Abadi was envisaged as a floating LNG project, but FLNG was ultimately vetoed in favour of onshore liquefaction by Indonesia's President Joko Widodo.

Shell staying downstream

Shell is not exiting Indonesia completing. Shell companies in Indonesia manage downstream businesses, which include mobility, lubricants and marine. Last November, Shell Indonesia completed the expansion of its Lubricant Oil Blending Plant, which doubled its production capacity to up to 300 million litres of lubricants products a year. Meanwhile, Shell’s Mobility business was managing 210 fuel stations in Indonesia as of end-June.