Onshore LNG: Evaluating the options for Indonesia's Abadi

The future of the remote, 20-tcf Abadi gas field offshore Indonesia has become more uncertain. In March 2016, INPEX's proposed 7.5-mmtpa FLNG US$15 billion development was rejected by the Indonesian government, in favour of an onshore LNG plant to boost local content. However, the increased costs associated with an onshore development could have a significant impact on project economics. We estimate a 7.5-mmtpa onshore project generates an IRR of 9.9%, versus 14.6% for the FLNG concept. In the current industry environment, the PSC partners would be unlikely to take on the considerable risks of a remote greenfield development unless it has clear terms and robust economics. We compare several incentives Indonesia could implement to make the onshore development more attractive.